Senior officials from London Forfaiting India (LFI) assert that the threat of sanctions or the downgrade of India's ratings have not dampened the company's enthusiasm, which continues to remain bullish on Indian economy and its export potential.

LFI, which has been operating in India and studying Indian market conditions since 1995 in association with an Indian finance company, Meghraj Finance, has decided to set up shop alone. Although LFI is yet to enter into any major forfaiting deals, currently it is concentrating on loan disbursals, especially syndicated loans and transferable financial instruments like bills of exchange, promissory notes, deferred payment lines of credit and so on.

The group's turnover last year was 2.27 billion. Currently, it has a strong presence in Europe and America apart from a number of offices around theworld.

LFI buys promissory notes and bills either directly from exporters or from their banks, subject to satisfactory assessment of sovereign and guarantor risks and then uses its international network of offices to distribute and place them with investor institutions as secondary-trade transactions. As a result of the political uncertainty, Asian crises and the threat of sanctions, the risk premium for Indian paper overseas has gone up, rendering it difficult for LFI to place the same with secondary investors. Even on the domestic front, forfaiting has taken a backseat because of the recent credit-policy measures reducing the post-shipment finance rates for the exporters.

With external commercial borrowings (ECBs) and other sources of foreign currency financing becoming more expensive in the wake of uncertainty and threat of sanctions, exporters and corporates are weighing all alternatives to tap funds for their operations. The list of deals done by LFI includes a $50-million syndicated loan to StateBank of India and loans to corporates like Thapars, Balaji, Sanghi and so on. The corporate loans are backed by bank or institutional guarantees. All the loans are floating interest rate loans and are of three to seven year tenure.

At present, LFI is negotiating with many other companies for raising ECBs. The Indian operations are being looked after by Satish Gopinath, country head, and Himanshu Kohli, assistant vice-president, both of whom have been on the Indian desk for the company for over two years.