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Banks rush to fund Hindalco's greenfield project

Hindalco, a flagship company of the Aditya Birla group, is in advanced stages of building a 359,000-tonne aluminium smelter plant and a 900 megawatt captive power plant at Odisha.

, ET Bureau|
Last Updated: Aug 17, 2012, 06.00 AM IST|Original: Aug 17, 2012, 06.00 AM IST
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MUMBAI: As fewer blue-chip firms are in the market to raise big-ticket loans to fund expansion, banks are vying with each other to finance a greenfield project of Hindalco Industries, where the aluminum maker is looking to raise a term loan of Rs 9,800 crore by the end of August.

Hindalco, a flagship company of the Aditya Birla group, is in advanced stages of building a 359,000-tonne aluminium smelter plant and a 900 megawatt captive power plant at Odisha. The total cost of the Aditya Aluminum project is Rs 13,195 crore. Of this, the company will raise a loan of Rs 9,896 crore while the remaining would be brought by the promoters as equity. The company has appointed SBI Capital Markets and IDBI for arranging the loan. Bank officials say both the arrangers have jointly underwritten 50% of the loan amount and have sought commitment from other bankers for the balance amount.

The tenure of the loan is 12.5 years, which includes a moratorium of 2.5 years. Bankers said that as per the terms, the company will make payments in the remaining 10 years through quarterly installments. The interest rate on the loan is pegged at 11.25%, said two bankers who have received the offer document.

"In absence of loan demand from blue-chip companies, most bankers are rushing to seek approval from their credit committees. Most bankers are quoting higher than they can absorb for Hindalco since the arrangers have said that the allotment would be on a pro-rata basis," said a senior manager in charge of credit in a commercial bank. Most Indian companies had deferred expansion projects following a worldwide slowdown that eroded demand. Banks too have been wary of lending due to falling profitabilities and rising defaults. In Hindalco, bankers have drawn comfort from the fact that the project is already under implementation and promoters have infused close to Rs 7,000 crore. Hindalco managing director Debu Bhattacharya told ET that the work is progressing on schedule. "We are confident that the project should complete by the middle of calendar year 2013."

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