The Rs 445 crore Raasi acquisition was funded by way of debt to the extent of Rs 180 crore by ICICI. Being a takeover funding the cost of the debt was a high 17.5 per cent. The company has initiated steps to come out with NCDs at a much lower rate in the range of 14 to 14.5 per cent to prepay the ICICI loan thereby saving interest costs. ICL NCDs have a AA rating.

According to a senior company official, the loan agreement with ICICI has a pre-payment clause which will enable the company to foreclose the loan thereby saving interest to the tune of Rs 4 crore a year. The issue is likely to be completed in the next two months.

The company is also contemplating prepayment of other high cost debts and the NCD issue size would be fixed after discussing with the various financial institutions, the official added.

Among the basket of debts, the company is looking at pre-payingRs 154 crore term loan from IDBI taken for the acquisition of Yerraguntla plant from the Cement Corporation of India (CCI). This loan carries an interest rate of around 16.75 per cent and the pre-payment clause in the loan agreement allows the company to exercise its right any time after February '99.

The other major loan component is the Rs 200 crore term loan for the Dalavoi plant. This loan from IDBI has has a floating rate for Rs 100 crore which will ensure that the interest rate get adjusted in tandem with the changes in the term lending rates. The balance Rs 100 crore has a fixed rate of interest.

The company plans to bring down its average cost of borrowings to around 14 to 14.5 per cent by paying off its high cost debts and save about Rs 7 crore a year. ICL official also added that the company was looking at commercial paper to fund its working capital requirements which is estimated to be in the region of Rs 300 crore for all the seven plants.