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JSPL Mauritius raises $ 150 million to repay loans taken from parent company Jindal Steel & Power

JSPL Mauritius has raised about $150 million through an ECB programme to repay loans taken from the parent company.

, ET Bureau|
Last Updated: Aug 03, 2012, 07.42 AM IST|Original: Aug 03, 2012, 07.17 AM IST
MUMBAI: JSPL Mauritius, a subsidiary of Delhi based Jindal Steel & Power, has raised about $150 million (about Rs 835 crore) through an external commercial borrowing (ECB) programme to repay loans taken from the Indian parent.

The company has raised a five-year loan from a consortium of banks comprising Standard Chartered Bank, ANZ Bank and Bank of Tokyo-Mitsubishi at a cost of 300 basis points over the Libor.

It will pay about $100 million to Jindal Steel & Power as part repayment for loans taken earlier, said Jindal Steel finance director Sushil Maroo. “We are bringing back money that we had earlier lent to our foreign subsidiaries for projects that we are building overseas. The idea is to allow our subsidiaries to raise loans overseas for projects outside India and to not leverage the Indian parent company,” Maroo said.

The move is expected to be in line with Jindal Steel’s plan to ring-fence the parent company from fluctuations witnessed in its overseas projects, mostly in mining and exploration, where the completion of the projects hinges on regulatory approvals and remains uncertain.

According to analysts, the strategy to allow foreign subsidiaries to raise money, especially in mining and energy businesses, is entirely expected.

“It’s bound to happen,” said Kumar Nair, managing director of Mumbai-based Transwarranty Finance, an investment bank that provides financial services to over 400 large and mid-cap companies. “The loan depends on the quality of assets that the foreign subsidiary owns.

In a mining-cum-metal project, banks would be willing to securitise assets which have clarity on production. Although global liquidity is still tight, funds are not a problem if there is a good business case,” he added.

Last month, JSPL, through its Mauritian subsidiary, acquired Canadian coal miner CIC Energy for Canadian $116 million (about Rs 600 crore). In 2010, the Delhi-based steelmaker used Jindal Steel Mauritius to acquire Oman’s Shadeed Iron & Steel for $464 million.

Jindal Steel had also raised an ECB last year for $475 million to invest in the Oman plant and expand capacity. Additionally, Jindal Steel had in early July also raised Rs 3,500 crore from a consortium of lenders for a steel project that it is setting up in Odisha. The loan will be used to build a 2-million-tonne, coal-togas direct reduced iron plant near Angul in Odisha.

While Maroo did not mention the amount of loans extended to its foreign subsidiaries, he said that Jindal Steel’s total debt is currently about Rs 17,000 crore, with a leverage of 0.9. Its average rate of borrowing is 9%, he said, adding that it is mainly due to low-interest loans that the company had borrowed earlier, which averages the current high rates.

Jindal Steel recently walked out of a $2.1-billion (about Rs 11,700 crore) mining-cumsteel project in Bolivia after the government of the Latin American country reneged on its contract to provide fuel to the project. The case is currently in the International Court of Arbitration.
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