India's corporate external borrowings on the rise

Over the past four years, external corporate borrowing for India has virtually doubled, while the gross external borrowing increased by less than 50%. This now accounts for as much as 37% of country's gross borrowing. 

However, a slowing economy and depreciating currency has engendered higher degree of risk for these corporate. Available data suggests that Q4 2014 has proved to be one of the worst corporate results season for India and the weak performance has extended to Q1 2015, notes Societe Generale.

As per a recent study by India Ratings, more than half the companies in the BSE 500 index (excluding banking and financial services) have operating structures that make them net foreign currency spenders. These companies, which accounted for around 70% of the debt of BSE 500 companies in FY13, would likely experience a 1.3 percentage point decline in their operating margin for every percentage point depreciation in the INR against the USD, says Societe Generale.