Easier ECB rules: OMCs look to raise $1.4 billion in first tranche

State-run oil-marking companies have decided to raise around $1.4 billion in the first tranche following the Reserve Bank of India’s (RBI) recent decision to ease rules for raising foreign currency loans overseas Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL), and Indian Oil Corporation (IOC) are seeking quotations for rates from various lenders to raise the funds under the relaxed external currency borrowing (ECB) norms, to meet working capital requirements, which mainly arise out of crude oil purchases. We are looking to raise $300 million and an additional $200 million as a green shoe option. We have just asked for proposals, and the process should be complete by mid-November, said a top official from HPCL. He added that whether more funds were needed to be raised through the ECB route would be decided later. IOC, the country’s largest refiner, is looking to raise $300 million under the ECB route in the first tranche. We intend to raise about half of the $10 billion, which the RBI allowed for eventually, said an official on condition of anonymity. The decision to ease the ECB norms was taken to help the OMCs access dollars through borrowings and, in turn, cut its physical demand. The first tranche is not expected to help in a significant way. As OMCs borrow, the physical demand for foreign currency will come down and help the rupee. The first tranche of OMC borrowing is a positive step but may not be a very significant one, said Madan Sabnavis, chief economist at CARE Ratings.

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