Foreign currency woes

Many businesses borrow in foreign currencies, such as the US dollar, to take advantage of ultra-low interest rates in the foreign markets. Such borrowing can be by issuing bonds or by loaning money from a foreign bank.

What looks like a smart move in the short term may come to haunt if the foreign currency appreciates with respect to the native one or the interest rates in the foreign market rise.

The table below lists some Indian companies that borrowed in US dollars a couple of years ago. Because the rupee has depreciated since then, they now have larger loan amounts outstanding. The repayment is due in the next five months. Keep an eye on how these companies deal with the repayment. The companies with high debt on their books may, especially, face some pressure.