"We repaid the yen loan of around Rs 594.10 crore today, the scheduled repayment date," chairman and managing director SN Johri told The Financial Express. "With this, Nalco becomes a debt-free company," he added.

Nalco was set up in the 1980s with an outlay of Rs 2,408 crore. The project was funded by equity capital of Rs 1289 crore from the Indian government, and Rs 1119 crore worth of eurodollar loans from a consortium of international banks.

Though the company had been repaying its loans on time, the overseas loan liability had shot up to Rs 2367 crore in 1991-92 following the devaluation of the rupee. This had created a serious imbalance in the company'sdebt-equity ratio.

Then, in a strategic move, Nalco began pre-paying the loans beginning from March 1995. By September 1997, Nalco had cleared all its dollar loans, having prepaid Rs 978 crore in addition to the scheduled repayment of Rs 439 crore. The only loan liability on its books was the yen borrowing that it repaid today.

"We could have pre-paid the Japanese loan but there was no provision for doing so in the loan agreement," a senior official of the company said.

However, Nalco is unlikely to remain a zero-debt company for long because the government is expected to clear a capital restructuring proposal any day now. Under this proposal, 25 per cent of its fully-paid equity capital of Rs 1288.62 crore will be converted into debt with a moratorium of four years, and another 25 per cent into fully redeemable cumulative preference shares.

Nalco is also planning a big expansion, for which it is likely to raise funds from the debt market. It will need Rs 3727 crore to expand its mining, refining,smelter and captive power capacity.