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CS Professional · Strategic Management and Corporate Finance · Foreign Funding - Institutions

Surya Components Ltd, an Indian manufacturer, wants to raise dollar-denominated funds from overseas lenders for importing capital goods, without issuing shares abroad. Which route fits best?

External Commercial Borrowing is the best fit. It is debt raised from recognised overseas lenders under the FEMA framework and can finance imports of capital goods, so no shares are issued abroad. GDRs are equity-linked, IDRs are issued in India by foreign firms, and rights issues are domestic.

  1. AExternal Commercial Borrowing under the FEMA frameworkCorrect
  2. BIssue of Global Depository Receipts
  3. CIssue of Indian Depository Receipts
  4. DRights issue to resident shareholders

Explanation

External Commercial Borrowing is a loan raised from non-resident lenders, regulated under FEMA, and can fund capital goods imports. GDRs involve issuing equity-linked instruments abroad, which the company wishes to avoid. IDRs are issued in India by foreign companies, and a rights issue is domestic.

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