Borrowing costs on foreign loans to get costlier as global bond yields rise

For instance, the finance cost as a percentage of total debt for BSE500 companies stood at 7.7% at the end of FY23, against 6.6% for companies with some overseas borrowings on their books.

The gross borrowings for BSE500 companies (excluding banks and financials) increased 11% year-on-year to ₹33.04 lakh crore in FY23, data sourced from Ace Equity database shows. Of them, nearly 70 companies had foreign loans on their books, totalling ₹4.4 lakh crore. Additionally, the foreign loans of these 70 companies account for 22.2% of their combined borrowings, which stood at ₹19.6 lakh crore as of March 2023.

The companies with the highest foreign loans in absolute terms include IOCL, ONGC, TATA Motors, NTPC, and Adani Ports & SEZ, among others. While the foreign currency loans account for more than 80% of Jubilant Pharmova and Oil India’s total borrowings in FY23, other companies like Adani Ports and SEZ, Glenmark Pharmaceuticals, and UPL also have borrowed more than 60% from abroad as of March 2023.

Source: Ace Equity

India's benchmark bond yield has hovered around 7.3% for the past few days whereas the US yield crossed 5% for the first time since 2007. That has resulted in shrinking the spread between the two notes to 237 basis points (bps), levels last seen in May 2006.