Corporate debt climbs, as firms start to expand

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SBI alone has sanctioned close to Rs 20,000 crore so far this year

Project financing and funding of capital expansion of companies is picking up pace. The country’s largest bank by assets, State Bank of India (SBI), alone has sanctioned close to Rs 20,000 crore so far in the first two months of the quarter. With its base rate about 50 basis points lower than others, SBI is also looking at taking over a large chunk of loans from other banks.

Among leading loan seekers, Tata Steel will get a loan of over Rs 50,000 crore to be utilised for its Rs 22,000 crore greenfield project at Kalinganagar in Odisha. The company is looking at a total debt of Rs 15,000 crore and about 10 banks are expected to participate in the funding.

Bankers say not many major Greenfield projects are taking off, and opportunities are more in brownfield project expansions.

Santosh Nayyar, deputy managing director of SBI, said, “Companies have started expansions and project implementations. We will grow our large corporate loans through fresh loans and by taking over loans from other banks. There is a huge refinance opportunity, as our base rate is at least 50 basis points lower than other banks, especially public sector banks. But it is impossible to quantify the refinance opportunity.”

“Credit growth was muted, but we have seen a sudden spurt in loan requests from December,” Nayyar added. Koushik Chatterjee, group chief financial officer at Tata Steel, said, “We are looking to close our project financing for the first phase of the Kalinganagar project.”

“We will be raising debt of around Rs 12,000 crore to Rs 13,000 crore to fund the first phase, and after its completion, we will take a call on further fund raising,” he said.

“Work is going on in full swing at the Kalinganagar project. We have mobilised significant amount of resources onsite and are expecting to ramp up work before the onset of monsoon in June-July,” he said, adding that the project was being funded at a debt-equity ratio of 50:50. Tata Steel is looking at only rupee loans, but may go for foreign borrowings at a later stage,” Chatterjee added.

Other companies that have undertaken greenfield and brownfield expansions include Hindalco, which saw a sanction of Rs 3,000 crore for its alumina plant in Uttar Pradesh from SBI, and Rashtriya Ispat, which received a sanction of close to Rs 2,000 crore.

Pratip Chaudhuri, chairman and managing director of SBI, said, “With a cost-effective funding opportunity, as our base rate is lower than a majority of banks, taking over loans of other banks will be a major thrust area. Besides, once mining is allowed, the operations of steel companies will improve. Also, the rupee not strengthening augurs well for the textile sector.”AP Chaudhry, chairman of Rashtriya Ispat Nigam, said, “We are raising funds for our expansion and modernisation. The company has earmarked capital expenditure of Rs 1,500 crore to Rs 2,000 crore for 2013-14.”

Rashtriya Ispat Nigam is spending around Rs 19,000 crore over the next three years on expansion, modernisation and upgradation of the Visakhapatnam steel plant.The greenfield project has been divided into three phases of 3 million tonnes per annum and is estimated to require an investment of about Rs 35,000 crore.A senior IDBI official said, “We have participated in the Hindalco and Tata Steel projects. But a large opportunity for project financing is yet to kick off. We expect the fourth quarter loan demand to be significantly higher than in the past three quarters.”

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