The GMR group has appointed IDBI Bank as lead arranger for raising debt for the Rs 7,500 crore expressway link between Kishangarh in Rajasthan and Ahmedabad.

GMR Highways chief executive officer Arun Kumar Sharma told Financial Chronicle: “Tying up project funds will be completed by April.”

At least 75 per cent of the project cost, or Rs 5,625 crore, will be in the form of debt. The equity component is Rs 1875 crore. A dozen banks are expected to be involved in the loan syndication.

The worry was over the pricing of the debt. However, GMR’s group chief financial officer, A Subbarao said, “We expect rates to begin retreating soon.” Despite the current high rates, he said, the company had no plan to access foreign currency funding for the project.

“Since there are no foreign currency earnings in the project, it is better to stick to domestic debt,” Subbarao said. This, despite the nearly 9 per cent rupee appreciation since mid-December and easing of debt costs in Europe.

Domestic term debt today costs about 12 per cent. Since banks extend term funds on a floating basis, Subbarao expected the project to benefit from the easing rates at home. GMR is looking for an average debt cost of about 10 per cent during the loan tenure. The engineering, procurement and construction contractors for the project have been finalised. They are L&T, Punj Lloyd Construction, KNS Construction and a group company GMR EPC. The expressway project, awarded in July last year, has a concession for 26 years from the beginning of commercial operations. The six-lane expressway will have eight toll points. This is the first major project being taken up for term funding after the banks slowed or stopped lending last year. Public sector bankers say they see less risk in highway projects in view of the traffic growth. As a result, competition for participating in project funding is expected to be intense. This is also because banks will have the first charge on project revenues during the expected 10- year debt repayment period. This lowers lending risks.

GMR is India’s largest private sector highway developer with a portfolio of four annuity- based projects and six toll projects.

cshivkumar@mydigitalfc.com