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January 2020 1

JANUARY 2020

BWR DRISHTIKONE



January 2020 2

Nascent signs of Economic Revival January 2020

Governments measures and Monetary easing by RBI

expected to reverse the economic slowdown in 2020

The domestic economy may see a moderate improvement in GDP in the next fiscal,

supported by Government measures. Muted manufacturing activity hit by slowdown in

automobile sector led the slowdown in the GDP to hit 4.55% in Q2 2019-20, the lowest

in last 26 quarters. Though, nascent signs of recovery in some of the economic

indicators are visible like moderate rise in passenger air traffic, sales of passenger cars

and improved manufacturing activity. December manufacturing PMI bought huge

respite to the otherwise gloomy industrial activity (evident from the continuous

contraction in eight core sectors and IIP). The economy may see reversal in slowdown

and show moderate improvement on quarter-on-quarter growth in the third and fourth

quarters supported by the policy initiatives taken by the government and RBI. The

upcoming release of advance estimates of GDP by CSO may give a better picture to

the full year GDP estimates, and we expect a GDP growth of 5% in the fiscal 2019-20.

Reforms carried out by the Government have restored banks to health, with the gross

NPAs of PSBs declining from Rs. 8.96 lakh crore in March 2018 to Rs. 7.27 lakh crore

in September 2019 and their provision coverage ratio rising to 76.6% in Sept 2019,

their highest level in seven years. Moreover, 13 banks have reported profits in H1FY20.

With improved asset quality and internal resource generation, PSBs are expected to

support prudential credit growth in the near term. To ease the flow of credit and to

improve the liquidity conditions of banks and NBFCs, the government has taken various

measures recently. However, bank credit to industries in the fiscal so far remained

negative at 3.9% as the transmission of monetary policy actions remained sluggish so

far. The NBFC/HFC sector is showing signs of stability and are able to raise funds from

market. Bank’s exposure to NBFCs increased 14% in the April to November 2019

period, but this could be largely due to better entities being able to obtain higher

financing from banks.

As against the cumulative reduction in the policy repo rate by 135 bps during February-

October 2019, the 1-year median MCLR has declined by just 49 basis points. A large

quantum of rate cuts has still not been transmitted, hence, the Monetary Policy

Committee kept the policy repo rate unchanged at 5.15% in its December 2019

meeting, after five successive rate cuts. Going forward we expect, RBI will adopt a wait

and watch approach amid mounting inflationary pressures as the risks from

international oil prices has also increased.

The declining investment, stagnant exports and rising unemployment is clearly a

wakeup call for the government to fast track the reform process and provide substantial

stimulus for reviving growth momentum. The government has already proposed to

spend Rs 13.6 lakh crore and Rs 19.5 lakh crore in the fiscal 2019-20 and 2020-21,

respectively (as part of its Rs 102 lakh crore capital expenditure in infrastructure sectors

during the fiscals 2020 to 2025), which is expected to boost the infrastructure activity

significantly in the next fiscal. If structural reforms are undertaken, FY 2021 could have

a growth of 5.5% to 6%.

IN THIS ISSUE…

Macro Indicators

Economy Trends

Performance in Core

Industries and IIP

Inflation and Repo Rate

Crude Oil and INR/USD rates

Balance of Trade

Forex Reserves and Import

Cover

Government Accounts

Sectoral Indicators

Automobiles

Telecom

Power

Steel

Cement

Banking

Airline

Debt Market Indicators

Movement in Bond Yields

Yield curve

External Commercial

Borrowings

Contacts

Rajat Bahl Chief Analytical Officer +91 22 67456634 [email protected] Anita Shetty Research Editor +91 22 67456633 [email protected]

Ria Matwani Research Editor +91 22 67456675 [email protected]

Praveen Pardeshi Research Analyst +91 22 67456681 [email protected]

mailto:[email protected]





January 2020 3

MACRO-ECONOMIC INDICATORS

Economy Trends

Despite the policy initiatives taken by the government and RBI’s continued accommodative

stance, the growth slowed to a six-year low in the first half of 2019, with both consumption and

investment decelerating owing to weak income growth (especially rural) and stresses in the

financial sector. On the external sector, after a rise in vulnerabilities in 2018, stability has returned

in 2019, anchored by high foreign exchange reserves and a modest current account deficit.

P: Projections, Source: MOSPI, BWR Research

Performance in Eight Core Industries and Index of Industrial Production (IIP)

Source: MOSPI, eaindustry.nic.in, BWR Research

BWR Views

Four consecutive months of

contraction in eight core sectors

and continued sluggishness in

the IIP growth suggests

deterioration in domestic

demand and consumption.

Some early signs of revival in

economic activity surfaced off

late, but most of the leading

indicators did not fetch much

optimism in the third quarter.

Hence, BWR retained its GDP

growth estimates at 5% for 2019-

20.

-0.4

-2.4

-1.1

-2.1

-1.8

-2.3

-2.9-2.7

-0.7

-2.0

-0.9

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.04.4

4.9

5.4

5.9

6.4

6.9

7.4

7.9

8.4

Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19

Quarterly Growth in GDP and CAD as a ratio of GDP (%)

CAD (RHS)

-3.8-1.5

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Oct-

18

Nov-1

8

Dec-1

8

Jan

-19

Fe

b-1

9

Ma

r-19

Ap

r-19

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

Nov-1

9

IIP and Core Industries (y-o-y growth in %)

IIP Core Industries


January 2020 4

Inflation and Monetary Policy Action

The Consumer Prices Index (CPI) increased significantly by 5.54%, touching a 40-month high in

November 2019, due to 10% increase in food prices. Easing Core Inflation (excluding food and

fuel) which remained at a moderate level of 3.5%, and deflation in fuel items owing to sustained

fall in crude oil prices helped to keep the overall inflation within the band of 2 to 6%. Continued

commitment to inflation targeting resulted in MPC taking a cautious stance in its December policy

meeting and kept the policy rate unchanged at 5.15%.

Source: MOSPI, RBI, BWR Research

Crude Oil Prices and INR/USD rates

Crude oil prices steadily moving upwards since last two months posing potential risk for both

inflation and the exchange rate. Huge foreign portfolio inflows and potential interventions by RBI

helped the rupee to strengthen, despite rising oil prices.

Source: Ministry of Petroleum & Natural Gas, FBIL, BWR Research

BWR Views

Although the flexible inflation

targeting framework has some

more scope for rate cuts, the

MPC may adopt a wait and

watch approach in the February

meet. Much will depend upon the

food inflation and its spread to

other sectors. The outlook for

inflation remains moderately

high for the next two months, as

onion prices are still ruling high

despite governments efforts to

increase the supply.

BWR Views

Indian rupee is vulnerable to

both domestic and global

factors. Stable oil prices, FPI

flows, helped the rupee to

remain steady against US dollar

so far, however latest

geopolitical developments in the

Middle East would become the

major driving factor will have a

serious bearing on crude oil

prices as well as rupee

movement. Recent upward

movement in international oil

prices may continue and

underlying economic concerns

also exert pressure on the rupee

in the coming months.

5.54

6.256.00

5.755.40

5.15

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Nov-1

8

Dec-1

8

Jan

-19

Feb-1

9

Mar-

19

Ap

r-19

May-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

Nov-1

9

Y-o-Y CPI Inflation and Repo Rate (in %)

CPI Inflation Repo Rate

65.5

71.19

67.0

67.5

68.0

68.5

69.0

69.5

70.0

70.5

71.0

71.5

72.0

50.0

55.0

60.0

65.0

70.0

75.0

Dec-1

8

Jan

-19

Fe

b-1

9

Ma

r-19

Ap

r-19

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

Nov-1

9

Dec-1

9

Cru

de O

il P

rices in

$ B

arr

el

Crude oil Prices and Rs per US Dollar

Crude oil (Indian Basket) Rs/$ (RHS)


January 2020 5

Merchandise Trade

Both exports and imports continued to decline in November 2019 compared to a year ago period,

leading to 31% reduction in trade deficit (y-o-y). Trade deficit is lower primarily because imports

have fallen at a faster rate than exports due to weak manufacturing activity and lower imports of

raw materials and capital goods.

Source: Ministry of Commerce, BWR Research

Forex Reserves and Import Cover

Amidst the gloomy economic scenario, Foreign exchange reserves crossed $450 billion mark at

the end of November 2019, reporting $57 billion increase in a year. The current level of forex

reserves is adequate to cover 11.8 months of imports, which is comfortable and helps to absorb

external shocks like exchange rate volatility. RBI is also seen intervening frequently in the current

fiscal to manage rupee at a comfortable level.

Source: Ministry of Commerce, RBI, BWR Research

BWR Views

External sector vulnerabilities

eased in 2019 compared to 2018

going by the latest available data

pointers like exports, exchange

rate, CAD and forex reserves.

The main external risks pertain

to higher oil prices. With global

economic slowdown, crude oil

prices remained almost stable so

far and helped to narrow

domestic trade deficit. Any

adverse international events

which prompt increase in the

prices of crude oil will aggravate

India’s import bill, as India

imports more than 70% of its oil

needs. The killing of the powerful

Iranian general, further

escalated tensions in the Middle

East, which is home to major oil

producing countries and key

energy supply routes.

BWR Views

In the event of external

pressures, India may continue to

rely on exchange rate flexibility.

With abundant forex reserves,

RBI may intervene frequently to

arrest any sharp fall.

-12164

-0.5

-12.7

-20000

-18000

-16000

-14000

-12000

-10000

-8000

-6000

-4000

-2000

0-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

Nov-1

8

Dec-1

8

Jan

-19

Fe

b-1

9

Mar-

19

Ap

r-19

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

Nov-1

9

India's Trade Balance

Trade Balance (USD mn) Exports (y-o-y in %) Imports (y-o-y in %)

393.7

451.1

11.8

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

360

370

380

390

400

410

420

430

440

450

460

Nov-1

8

Dec-1

8

Jan

-19

Fe

b-1

9

Ma

r-19

Ap

r-19

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

Nov-1

9

Forex Reserves and Import Cover

Foreign Exchange Reserves (USD bn) Import Cover in months (RHS)


January 2020 6

Government Accounts

The fiscal deficit has crossed the Budget Estimates (BE) of Rs 7037.60 billion to Rs 8,078 billion

during April to November 2019 period. Both total expenditure and total receipts increased by

~13% each over the comparable period last year. Through disinvestments, government has

collected Rs 17,364 crore so far and expected to generate more to bridge the fiscal gap. Despite

RBI’s dividend transfer, it has been expected that the fiscal deficit target is likely to be missed by

0.5 percentage points in the current fiscal.

Source: Controller General of Accounts, Ministry of Finance, BWR Research

The gross GST revenue collected in the month of November and December 2019 crossed one

lakh crore each, showing steady rise in collections. During April-December 2019 vis-à-vis 2018,

the gross GST revenue collection has grown by 4.3% and the December 2019 GST collection is

the third highest monthly collection since introduction of GST.

Source: Ministry of Finance, BWR Research

BWR Views

The cut in corporate tax rates expected a shortfall of Rs 145,000 crore revenue to the Government. The recent disinvestments announcement by Government is likely to reduce its financial burden and improve public finances. The stake sales are equally critical to meet its disinvestment target of Rs 1.05 lakh crore set for the current fiscal year.

20,826

8,966 10,122

27,863

16,132

18,201

7,038 7,166 8,078

-

5,000

10,000

15,000

20,000

25,000

30,000

2019-20 BE 2018-19 (Apr-Nov) 2019-20 (Apr-Nov)

Govt Accounts: Trends in Revenue and Expenditure (Rs Bn)

Total Receipts Total Expenditure Fiscal Deficit

8.9%

-7.0%

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

0

200

400

600

800

1,000

1,200

GST collection (Rs billion)

2018 2019 Y-o-Y growth (RHS)


January 2020 7

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Nov 2

018

Dec 2

018

Jan

2019

Fe

b 2

019

Ma

r 20

19

Ap

r 201

9

Ma

y 2

019

Jun

2019

Jul 2019

Au

g 2

019

Se

p 2

019

Oct 201

9

Nov 2

019

Automobile Sales (Growth y-o-y)

Passenger Vehicles Commercial Vehicles

Two & Three Wheelers Exports

SECTORAL INDICATORS

Automobiles

Domestic automobile sales fell by 12% y-o-y in the month of November 2019 largely driven by

weak sales of commercial vehicles and two wheelers. Commercial vehicle sales were down by

15% and two & three wheelers sales were down by 14% y-o-y in November 2019. The weak

commercial vehicle sales reflect the subdued state of industrial activity in the country and weak

two wheeler sales indicate low rural demand. Commercial vehicles sales were also impacted by

revised axle norms and financing issues due to NBFC crisis.

Though there was healthy growth in automobile sales in September and October on a sequential

basis due to festive buying, this recovery was short lived and in November the sales again slipped

in the red zone.

Source: CMIE, BWR Research

On the export front, there has been a growth of 18% in November 2019, which is a result of low

base in November 2018, when the exports fell for the first time in last 21 months. Though, there

has been a growth in overall export numbers in November 2019, commercial vehicles still

registered a decline of 29% y-o-y in exports.

BWR Views

Commercial vehicle sales will

continue to remain muted going

forward. However, it might pick

up in the last quarter of FY20 due

to anticipated pre-buying by fleet

owners before the BS-VI norm

kicks in from April 2020. Though,

the sales may still be lower than

the previous year’s sales, but is

expected to improve on month-

on-month basis. Also, soon to be

announced, scrappage policy

might provide some support to

the automobile sales recovery.


January 2020 8

0

50

100

150

200

250

300

350

400

450

Wireless Telecom subscribers (in million)

Bharti Airtel Vodafone Idea Reliance Jio BSNL Others

Telecom

Consolidation of the market continues with Jio increasing its market share and driving the overall

subscriber additions in the sector. The increase in subscriber base is likely driven by rise in rural

subscribers. The subscriber base is expected to widen further as the penetration increases,

especially in rural areas. Cheap data and feature phones will drive the subscriber base in rural

areas.

Source: TRAI, BWR Research

All the telecom operators hiked their tariffs in the month of December 2019 between the range

of 30%-40% in order to improve profitability -. While, the move will certainly help in bringing down

the losses of incumbents, the troubles for the sector are far from over as the petition filed by the

incumbents in the Supreme Court regarding AGR dues is still pending. Also, tariff hikes will not

serve the desired purpose unless it is accompanied by a reduction in the license fee and

spectrum usage charges for which there are no indications from the Government. With the telcos

already under immense liquidity pressure, the impending 5G auction is also expected to get a

lukewarm response.

BWR Views

The tariff hikes by all the players

is a credit positive for the sector

especially for Bharti Airtel and

Vodafone Idea.

Vipula Sharma

(Director - Ratings)

[email protected]

Aakriti Sharma

(Asst Manager - Ratings)

[email protected]




January 2020 9

Power

Power generation fell by 13% y-o-y in October 2019 reflecting a slump in demand particularly

from industrial in the country. This is evident from lower generation from thermal sources, as the

thermal power units continue to struggle on account of falling demand amid reduction in

manufacturing and industry output. The power sector also faces other challenges such as non-

availability of adequate bank credit, absence of long term Power Purchase Agreements (PPAs)

and issues related to coal tie-ups.

Despite taking various measures, the Government has not been able to fully resolve the issues

associated with the power sector. The Finance Minister, in her recent announcements related to

infrastructure sector push, has highlighted projects worth Rs. 25 trillion being in the pipeline for

energy sector. Also, various other reforms for upgrading technology and improving operational

efficiency of power utilities are expected to be rolled out soon. With majority of Discoms still

continuously failing to honour their commitments, how new reforms will be able to improve the

situation is yet to be seen.

Source: Central Electricity Authority, BWR Research

India's power supply position improved in October 2019. However, the country is still not power

surplus due to DISCOMS stressed financials on account of its mounting losses and huge debt

burden.

Source: Central Electricity Authority, BWR Research

BWR Views

Pick-up in the economic activity and industrial output is critical for the power demand to revive which in turn is imperative for an improvement in the financial condition of thermal power plants.

Vipula Sharma


[email protected]

Aakriti Sharma

(Asst Manager - Ratings)

[email protected]

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

Oct ,2018

Nov ,2018

Dec ,2018

Jan ,2019

Feb ,2019

Mar ,2019

Apr ,2019

May ,2019

Jun ,2019

Jul ,2019

Aug ,2019

Sep ,2019

Oct ,2019

Power Generation (Growth y-o-y)

Thermal Nuclear Hydro Renewables

-2.0%

-1.5%

0.0%

-1.8%

-3.2%

-1.7%

-1.0%

0.0% 0.0% 0.0%

-4.0%

-0.4%

-4.5%

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

Northern Western Southern Eastern North Eastern All India

Power Supply Position - Peak (Surplus/Deficit)

Oct 2018 Oct 2019




January 2020 10

43,000

45,000

47,000

49,000

51,000

53,000

55,000

57,000

59,000

61,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Nov2018

Dec2018

Jan2019

Feb2019

Mar2019

Apr2019

May2019

Jun2019

Jul2019

Aug2019

Sep2019

Oct2019

Nov2019

Steel Production & Prices

Finished steel production (000 tonnes) Finished steel consumption (000 tonnes)

Finished steel prices (Rs per tonne) (RHS)

280

300

320

340

360

380

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Oct2018

Nov2018

Dec2018

Jan2019

Feb2019

Mar2019

Apr2019

May2019

Jun2019

Jul2019

Aug2019

Sep2019

Oct2019

Cement Production & PricesProduction (000 tonnes) Consumption (000 tonnes)

Average retail price (Rs per 50 kg) (RHS)

Steel

The ongoing stress in the automobile and real estate sectors curtailed the demand for steel.

Global issues continue to weigh on prices, however domestically demand is expected to pick up,

going by the recent announcement about a substantial push to infrastructure by the Finance

Minister. As per the announcement, Rs. 102 lakh crores are expected to be invested for

infrastructure over the next five years, with 22% coming from the private sector and 39% each

from the Central and State governments.


Cement

Cement prices have started correcting from June 2019, after witnessing a sharp increase in April

and May 2019, which was based on anticipation of healthy demand going forward. The prices

started coming down reflecting a weak actual demand.


BWR Views

The sector is expected to improve gradually with the expectation of improvement in auto demand. Also, construction activity has accelerated, and as the financial year enters the final quarter, government spending is also showing signs of improvement. Recent announcement to push infrastructure is bound to give a good fillip to the steel sector.

BWR Views

With the continuous focus of the Government on infrastructure and affordable housing, the cement demand is expected to increase going forward. Various cement manufacturers have been adding capacities to meet the incremental demand and the same is likely to keep the prices stable

Vipula Sharma


[email protected]

Shashank Joshi

(Rating Analyst)

[email protected]

Vidya Shankar

(Senior Director - Ratings)

[email protected]





January 2020 11

5.3%

3.4%

0.3%

9.9%

8.3%

0.5%

2.0%

-3.9%-2.2%

8.3%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Overall BankCredit

Agriculture Industry Services Retail loans

Banking - Sectoral Credit Growth

YTD Nov 2018 YTD Nov 2019

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

100

105

110

115

120

125

130

135

Domestic Passengers Carried by Airlines

Domestic passengers (in lakhs) Growth (y-o-y)

Banking

Overall bank credit during the period April-November 2019, increased by only 0.5% as compared

with a growth of 5.3% during the same period previous year. The slowdown was more evident in

the industry and services sector. This can be attributed to cautious lending approach by banks

as they have shifted focus towards lending to the retail sector, where the probability of

delinquency is lower. Also, with the slowdown in the economy, the demand for credit has dried

up with low or almost no private investments happening in the economy.

Source: RBI, BWR Research

Airline

Domestic passengers carried by airlines increased by 11% y-o-y in the month of November 2019,

highest growth in the year 2019. This growth was aided by low fares and the onset of year-end

holiday season.

Source: DGCA, BWR Research

BWR Views

The industrial sector, which has relatively higher levels of non-performing assets (NPAs), witnessed 3.9% fall in credit deployment in the current fiscal so far. Credit growth is expected to remain muted in the coming months on account of slowdown in private investments in the economy.

BWR Views

Air Passenger traffic growth is expected to be healthy in December as well. However, domestic air passenger traffic is expected to grow in the single digits this fiscal, mainly because of weak growth in the beginning of the years due to capacity shortage caused by grounding of Jet Airways.


January 2020 12

DEBT MARKET INDICATORS

Movements in Bond Yields

Bond yields (annualised) of Public Sector Units (PSUs), Corporates and Non-Banking Finance

Companies (NBFCs) maturing in 5-year, 3-year and 1-year tenure with corresponding

Government Securities and Marginal Cost of funds based Lending Rate (MCLR) of banks are

provided below.

Source: FIMMDA, SBI, HDFC, BWR Research


BWR Views

Going forward, we expect the yields to continue to remain volatile on account of uncertainty on next repo rate cut by Reserve Bank of India amid higher crude oil prices on back of geopolitical tensions.

6.20

6.60

7.00

7.40

7.80

8.20

8.60

9.00

01-N

ov

06-N

ov

11-N

ov

16-N

ov

21-N

ov

26-N

ov

01-D

ec

06-D

ec

11-D

ec

16-D

ec

21-D

ec

26-D

ec

31-D

ec

5-year AAA Corporate Bond yields vs Gsec yield, MCLR

PSU Corp NBFC

GSEC SBI MCLR HDFC MCLR

5.8

6.2

6.6

7.0

7.4

7.8

8.2

8.6

9.0

01-N

ov

06-N

ov

11-N

ov

16-N

ov

21-N

ov

26-N

ov

01-D

ec

06-D

ec

11-D

ec

16-D

ec

21-D

ec

26-D

ec

31-D

ec


PSU Corp NBFC



January 2020 13


The yields of AAA rated corporate bonds maturing in 5-year, 3-year and 1-year have little

changed in December compared to easing trend seen in November due to pause in rate cut cycle

amid uncertainty in gauging further course of rate action by Reserve Bank of India’s Monetary

Policy Committee on account of rising inflation.

Yield curve of AAA PSUs, NBFCs, Corporates and G-sec

The G-sec yield maturing in 1 year compared with Corporate bonds yields of PSUs, NBFCs and

Corporates of similar maturity buckets have been volatile in the month of December due to

unexpected pause in RBI’s December monetary policy. However, the market is awaiting

measures for revival in sentiments.

Source: FIMMDA, BWR Research

5.0

5.4

5.8

6.2

6.6

7.0

7.4

7.8

8.2

8.6

9.0

01-N

ov

06-N

ov

11-N

ov

16-N

ov

21-N

ov

26-N

ov

01-D

ec

06-D

ec

11-D

ec

16-D

ec

21-D

ec

26-D

ec

31-D

ec


PSU Corp NBFC


8.45

6.15

8.50

6.68

8.42

6.27

7.19

5.61

5.00

5.40

5.80

6.20

6.60

7.00

7.40

7.80

8.20

8.60

9.00

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

Nov-1

8

Dec-1

8

Jan

-19

Fe

b-1

9

Ma

r-19

Ap

r-19

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

Nov-1

9

Dec-1

9

1-year rolling monthly yield curve for AAA PSU, NBFC, Corporate and GSEC

PSU NBFC Corp GSEC


January 2020 14

External Commercial Borrowings

Indian companies continue to prefer overseas borrowings on account of easy availability of

longer tenure loans from overseas. In November 2019, companies’ borrowings through ECB

increased 2.34% compared to same period previous year. However, on month-on-month basis

in November ECBs reported slight fall due to some volatility in rupee and geopolitical tensions.

Source: RBI, BWR Research

BWR Views

Companies borrowing through External Commercial Borrowing (ECB) may remain muted in coming months due to volatility in local currency on the back of concerns on longevity of geopolitical tensions.

3917

1347

2714

2175

4827

1706

1411 2

066

3158

3548

5399

4981

3317

4889

3415

2115

0

1000

2000

3000

4000

5000

6000A

pril

Ma

y

Jun

e

July

Au

gust

Se

pte

mb

er

Octo

ber

Novem

ber

ECB ($mln)

ECB ($Mln) 2018 ECB ($Mln) 2019


January 2020 15

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