India Inc might not even need a Fed rate cut — but it wants one
Emerging markets have been on tenterhooks for the better part of this year as the Federal Reserve has been dangling the prospect of an interest rate cut.
NEWS
6/23/20242 min read
India Inc might not care this time.
“All of this increase in interest rates has, in fact, not actually impacted us at all on a business standpoint,” Sumant Sinha, chief executive of ReNew, India’s largest clean energy producer and a Nasdaq-listed firm, told CNBC’s Inside India.
Despite the Reserve Bank of India hiking rates alongside its global peers, Indian companies have continued to grow like never before. ReNew, for instance, reported positive sales momentum in its latest full-year results. Strikingly, it also became profitable as a public company for the first time.
ReNew appears to be straddling both U.S. and Indian markets cleverly. The $2.3 billion firm operates entirely out of India, yet its largest shareholders are U.S. and Canadian institutions. It raises U.S. dollar-denominated debt, but it’s careful to hedge against any depreciation in the rupee.
Being savvy has paid off, and lenders have taken notice. Societe Generale, the French bank, recently agreed to lend it up to $1 billion in the current market environment over the next three years. That’s on top of the billions more non-bank financial institutions are offering the company that currently has the capacity to produce about 10 gigawatts of clean power.
“Over the last 18 months, we’ve actually refinanced almost a billion dollars’ worth of our international bonds through the rupee market,” Sinha said. “Actually, we’ve been able to bring down our borrowing costs by almost 60 basis points by having done some of that.”
It’s not the only one. Across the country, many businesses and industries continue to grow, as if the rise in rates doesn’t matter and that current levels are normal.
Indeed, unlike most developed economies, India’s interest rate regime in 2024 isn’t any different from that of 2018.
What happened in the markets?
Indian stocks are making slow progress, but are holding on to their year-to-date gains since the general election results were revealed. The Nifty 50 index is heading for a 0.4% gain this week. The index has risen 8.45% this year.
The benchmark 10-year Indian government bond yield has remained relatively subdued, with the yield falling below the 7% mark and closing in on record lows.