The RBI raises the repo rate to 5.5%. What dearer money means for private rounds

On 7 October the Monetary Policy Committee raised the repo rate by 25 basis points to 5.50% and changed its stance to "calibrated tightening". The reasons given were familiar ones for a hard year: crude at about $116 a barrel for the Indian basket in September, a monsoon about 13% below normal, core inflation broadening, and bank credit growing at about 18%. Inflation is projected to peak at about 6% in the December quarter; growth for FY27 is still projected at about 7.1%.

Who feels it first

Higher policy rates reach companies through their bank lines. The businesses that feel it most are the ones that carry large working capital: commodity processors, jewellers holding gold, distilleries buying grain in season, contractors waiting on milestone payments. For them, a quarter-point rise in borrowing costs comes straight out of thin margins.

What it does to valuations

Higher rates also raise the return investors demand, which pulls listed multiples down, and they have already fallen this year. Private rounds tend to reprice more slowly, so a round priced against last year's peers can look cheap on paper and still be expensive against the market today.

What to ask in a room

• How much of the company's debt is floating-rate working capital, and what does a 25–50 bp rise do to profit?
• Is growth funded by the round itself, or by more borrowing?
• Is the entry multiple set against where listed peers trade now?
• Does the projection assume interest costs at today's rates?

Each room on the desk sets out the company's debt and the use of the money raised. In a tightening cycle those two lines matter as much as the revenue chart.

The next policy meeting is on 2–4 December.