Indian firms rush for Samurai loans

BloombergMUMBAI (Bloomberg) — Indian companies lured by Japan’s near-record low interest rates and easier availability of funds are raising the most yen-denominated loans in more than a decade as dollar lenders turn cautious.

While Samurai loans still make up only a small portion of Indian firms’ total foreign-currency facilities, coming to more than 6 percent this year, they are growing in importance for borrowers. Power Grid Corp. and Indian Railway Finance Corp. are seeking such debt, adding to $846 million worth of yen syndicated loans raised by domestic companies this year, people familiar with the matter said. That’s the most since the same period in 2006.

Highly rated Indian companies are turning to Samurai loans as overseas banks become more reluctant to extend dollar funds amid impending interest-rate hikes in the United States and turbulence in Turkey and Argentina. Most lenders in the South Asian nation, battling the highest bad-debt ratios since 2000, are also unwilling to make longer-tenor domestic loans.

Rural Electrification Corp. signed a Samurai loan last month because raising yen and switching the funds to rupees was about 10 basis points cheaper than swapping from dollars to the Indian currency, according to Ajeet Agarwal, finance director at the lender.

RECL had raised a bilateral five-year yen loan equivalent to $92.5 million from Mitsubishi UFJ Financial Group Inc. and swapped it into rupees, people familiar with the matter said.

Average margins on Samurai loans of Indian firms are 73 basis points this year, compared with 143 for dollar borrowings, data compiled by Bloomberg show.Speech

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