The three Tata Group companies - Telco, Tisco and Tata Electric (TEC), have been permitted by the Reserve Bank of India (RBI) to retain $358.21 m abroad till the end of the year. The money, raised by means of external commercial borrowings (ECB) would otherwise have to be brought into India, given the RBI guidelines.
The RBI has been pulling up corporate, which have raised ECBs but are yet to either use it or repatriate it. As per existing guidelines, if the money is not utilized within a year of it being raised, the concerned corporate has to repatriate the money. However, as in this case, the RBI can make exceptions and permit companies to defer the repatriation process.
Telco, Tisco and TEC have pending capital expenditure plans for which they would be requiring foreign exchange. This move to permit them to retain the funds abroad will protect them from possible cost escalation, which is likely to occur in case the rupee weakens. Infact, the Indian Rupee has already weakened after the crisis at Kargil broke out.
Though there is no tangible gain from this, these companies have been able to avoid notional losses, which they would have incurred on purchasing dollars later to meet their capital expenditures.
Analysts currently rate Telco as a 'BUY' mainly on account stable freight rates and SUGGEST of the economic recovery.
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