India Inc's overseas borrowing up 6.5% to $2.12 billion in Nov 2019: Report

Overall borrowings by India Inc from overseas markets grew 6.5 per cent to $2.12 billion in November 2019, the Reserve Bank data showed.

Domestic companies had borrowed over $1.99 billion in November 2018 from foreign sources.

Of the total foreign borrowing during the month, $2,11,53,22,022 was raised through the automatic route under the external commercial borrowing (ECB).

No capital came in through the approval route, while the rest of $9,86,681 was by way of issuance of rupee denominated bonds (RDB).

The major borrowers in the automatic route of ECB were: Adani Transmission Ltd ($500 million for refinancing of rupee loans), Tata Motors Ltd ($400 million for rupee expenditure), Oil and Natural Gas Corporation ($300 million for new project) and JSW Steel Ltd ($250 million for refinancing of earlier ECB).

Among others, Home Credit India Finance raised $61.58 million for on-lending purpose, manufacturing firm Nipro India Corporation Private Ltd borrowed $52.1 million to carry out modernisation work, non-metallic mineral producer Owens-Corning (India) Private Limited raised $30 million for working capital needs, and Exxonmobil Services & Technology Pvt Ltd borrowed $30 million for rupee expenditure.

Margdarshak Financial Services Limited, which is into micro finance business, except for insurance and pension funding, was the sole entity to raise the money by issuing the rupee bonds (popularly known as masala bonds).

India Inc should make bold investment decisions to push up growth: PM Modi

Structural weaknesses in the economy have been taken care of and India Inc should now make bold investment decisions to push up growth and help the economy reach the $5-trillion target, Prime Minister Narendra Modi told corporate leaders on Friday.

Speaking at an event to mark 100 years of industry body Assocham’s foundation, Modi said there would be investments worth Rs 100 trillion in the infrastructure sector over the coming years while Rs 25 trillion would be spent on the rural economy.

He added the government would spend Rs 3.5 trillion on delivering clean and safe drinking water to every household.

Referring to public discourse on the current ongoing economic slowdown, Modi said he refused to challenge the criticism of the government, and instead focused on positive signs of growth. However, repeatedly hitting out at the previous United Progressive Alliance government, Modi said gross domestic product growth had plummeted to only 3.5 per cent during one quarter.

He also said the inflation rate then was a high 9.4 per cent while the fiscal deficit was hovering at 5.6 per cent of GDP. GDP growth fell for six consecutive quarters to a six-year low of 4.5 per cent in July-September 2019 amid a sustained slump in manufacturing and declining consumption.

“I don’t want to engage in the debate over why some people (who are speaking now) were silent back then. The country’s economy has faced ups and lows earlier as well but now the economy has the resilience to reverse the current slowdown and return to a high-growth trajectory,” Modi said.

Achieving a $5-trillion economy is absolutely possible, he added.

Commenting on detractors who argued the target was unnecessary, Modi clarified he remained unfazed by criticism since the beginning. The government is working to end the inverted duty structure for goods, as a result of which the cost of manufacturing was going down.

Modi also stressed foreign direct investment (FDI) inflows had continued with more than 50 per cent of all inbound investments over the past 20 years being made during the past five years of the BJP government’s tenure. However, official statistics show equity capital investments have seen a 1 per cent dip in 2018-19 to $44.36 billion after scaling a peak of 35 per cent annual growth in 2015-16.

The prime minister said India’s rank was 142nd among all countries on the ease of doing business, which has now risen to 63rd, and noted that India was among the top 10 nations which had in the last three years made continuous improvement.

Seeking support for the comprehensive policymaking which led to this, Modi said he had to suffer anger and allegations directed at him, and talked of the support Indians allowed him to achieve it.

In the 50-minute speech, Modi took digs at industrialists in the audience. Referring to the government’s decision to decriminalise offences under the Companies Act, Modi said people should not forget how difficult it was to do business under the earlier regime.

After a round of claps from the audience, he said the claps were not loud enough and many people seemed not to know what his government had done.

Modi stressed the government had been successful in achieving 100 per cent “open defecation free” status over a period of 60 months, in time for Mahatma Gandhi’s 150th birth anniversary.

India Inc spent more on R&D in FY19, auto and pharma leading sectors

Research and development (R&D) spending by India Inc increased in 2018-19 (FY19) over the previous years (led by automobile and pharmaceutical sectors). But, it was still a small percentage of the total sales. In FY19, India Inc spent Rs 8,721.3 crore under the R&D head — nearly a fifth more than the amount in 2017-18 (FY18), which was Rs 7,098.5 crore.

The details of these expenses are available in the annual reports of companies, usually published by the end of the second quarter of the next financial year. This analysis looked at 440 companies for whom the continuous data is available for the past 10 years.

Even though the R&D expenditure has increased, it is still a small percentage of the total sales.

The total R&D spending is about 11 basis points (bps) as a percentage of net sales.

It was 10 bps in FY18. It was about 13 basis points in FY16 and FY17 for the sample under consideration, showed the data.

India Inc spent more on R&D in FY19, auto and pharma leading sectorsAlso, a large part of it is driven by a single company which accounted for nearly half (48.4 per cent) of the total expenditure for the companies in the sample.

The biggest spender was Tata Motors, with Rs 4,224.6 crore assigned under the R&D head. That’s about 1.4 per cent of its net sales. A lot of it is because of its foreign subsidiary.

“I’m not surprised that Tata Motors tops the charts among all the companies. It is largely due to Jaguar Land Rover. The company has been pumping large amounts into the subsidiary,” said Mahantesh Sabarad, head of retail research at SBICAPS Securities.

Since acquiring JLR in 2008, Tata Motors has been incurring a capital expenditure in excess of £S2.8 billion every year (over Rs 25,000 crore at the current exchange rate). Of this, a big chunk is accounted for by R&D.

Tata Motors’ focus areas include developing clean technology vehicles and implementing required safety features, as well as emission standards under Bharat Stage VI (BSVI), said the company in a response to an email.

“We also made substantial investments in clean and sustainable mass transportation and small commercial vehicles for last-mile connectivity. These investments focus on improving cost of ownership. In the last couple of years, the focus has been on BSVI developments,” said a Tata Motors spokesperson.

Other big spenders include metal companies as well as the health care segment.

The health care sector has been amongst the biggest spenders on R&D traditionally. The sector spent Rs 1,740 crore in FY19. Biocon is among them. It spent Rs 320.6 crore this year. It is up 67.2 per cent over the previous year. It had spent Rs 191.8 crore in FY18.

Kiran Mazumdar-Shaw, chairperson and managing director, Biocon, said R&D spending would be around 13-15 per cent of revenue.

Other big spenders on the sectoral list include industrials, energy, and consumer staples.

India spends less on R&D than key emerging market peers.

The latest available World Bank data shows that Brazil spent 1.3 per cent of its gross domestic product (GDP) on R&D in 2016. In 2017, Russia spent 1.1 per cent of GDP and China spent 2.1 per cent of GDP.

India’s overall spending on R&D is 0.6 per cent of GDP in 2015. It is higher in developed countries such as the United States (2.8 per cent in 2017) and Japan (3.2 per cent in 2017).

Globally, for major companies such as Microsoft or Johnson & Johnson, it can be upwards of 10 per cent of sales.