IndianOil scraps Rs. 14.9K cr SBI Caps loan
New Delhi   06-Feb-2012

State-owned IndianOil has scrapped a Rs 14,900 crore loan syndicated by SBI Caps. The loan was to fund construction of a new refinery that the flagship refiner-marketer is building at Paradip in Orissa with an investment of nearly Rs 30,000 crore.

The company is considering ECBs (external commercial borrowings) and domestic bonds to mop up funds required up to 2014-15 for the refinery to save interest costs. SBI Caps had syndicated the loan with a consortium of 21 banks in 2009 with SBI as the lead banker.

There are two basic factors that drove IndianOil to opt out of the rupee loan. One, the loan was linked to the base rate introduced by the RBI in July 2010.

This resulted in an annualized interest rate of 12.32% (including other charges). In contrast, IndianOil be has been mobilising funds for the project in the last two years at an average interest rate of 6.5%.

Two, after the RB! recently allowed companies to raise up to $750 million through ECBs in a financial year to fund capital expenditure, and due to lower interest outgo on external borrowings and domestic bonds, IndianOil decided to scrap the loan arrangement.

IndianOil will not have to return any money to SBI Caps since it had not drawn any funds. The loan was to be availed over a three-year period and repayable in 35 quarterly installments from September2013.

As per the funding plan, the Rs 14,900-crore loan was to meet part of a debt component of Rs 18,947 crore. The remaining Rs 4,047crore was to be met through export credit agencies and external borrowings.