Indian companies, which raised billions of dollars from overseas sources during the pre-Covid era, are now finding it difficult to raise funds with corporates raising 35 per cent less from overseas sources in calendar 2020 year to date as compared to the same period of last year.

Analysts said apart from the coronavirus pandemic which has resulted in higher interest rates, the default by Future Retail has impacted the sentiments of investors. “‘While looking at the trends of the wider market, we can see that even Softbank had problems in raising funds from investors. The rates at which funds were offered to Softbank was as high as 8-9 per cent. This shows that the investors are worried about the future,” said a banker. For Indian companies, the rates have gone up to as high as 10 per cent which makes it uneconomical to raise funds from foreign sources, he said.

Besides as very few Indian companies have large projects or planning to invest in the near future, fund raising by local companies have dried up. Statistics show that Indian companies have raised $9.1 billion in till August 12th this year in calendar 2020 as compared to $14 billion a year ago.

In 2018, fund raising from overseas markets was $15.6 billion.

“As of now, the sentiment for Indian companies in global resource market is not very positive due to Indian companies defaulting, global market is at stagnant situation and emerging markets are perceived as high credit risk during this Covid period,” said Prabal Banerjee, Group Finance Director of the Bajaj Group.

Foreign investors, bankers said, are however betting on big corporates like Reliance Industries, ONGC and Air India which either have capacity to repay loans or are backed by government guarantee. Air India managed to raise $817 million in March when the entire world was going through a lock down. While Reliance was raising funds to repay its old loans, it also managed to raise billions of dollars from a string of marquee investors by selling stake in its telecom and digital venture, Reliance Jio.

Bankers said the rest of the 2020 will continue to show bearish trend as investors will shy away from investing in debt instruments of Indian companies. “The Indian economy is slowly coming out of the Covid-19 lockdown and demand is slowly showing signs of recovery. In few months, India economy will show full recovery to pre-Covid levels. Corporates will then start investing in new capacities leading to fund requirement,” said another banker.

“Once the vaccine comes out, I believe the entire scenario will change and Indian companies will be in a better position to raise long term resources from global market,” Banerjee added.