Indebted India Firms May Get a Reprieve as Dollar Loans Rebound

Indian firms facing record debt repayments and one of Asia’s worst economic slumps may be catching a break as demand rebounds for corporate dollar loans in the region.

Dollar-denominated loans signed by Indian companies recovered to $3.4 billion in the September quarter, from the lowest since 2009 in the previous three months amid the pandemic, according to Bloomberg-compiled data. And in a sign that lenders are willing to earn less extending credit to those firms, average margins on U.S. currency loans fell to the least this year in the July-September period.

India’s economy has been hit especially hard by the Covid-19 outbreak and the world’s biggest lockdown, with analysts forecasting the sharpest annual economic contraction among Asia-Pacific nations. Even as domestic demand totters, the nation’s companies need to repay a record $16.3 billion of foreign-currency bonds and loans in the current quarter, and improved access to the dollar loan market boosts a key funding source for that.

Banks have become more willing to lend to firms in other parts of the region as well. Dollar loan volumes in North Asia rebounded last quarter from a nine-year low in the April-June period, while those for Southeast Asia jumped from the least since 2012 in the same period, according to Bloomberg-compiled data.

Indian deals last quarter included a $500 millionterm loan of state-controlled Export-Import Bank of India. It got the most lender commitments in syndication among the nation’s overseas loans this year, in a sign that many global investors are eager to lend in India, especially if the target is a solid credit like a quasi-sovereign issuer.

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