According to industry sources, the refinancing of their existing facility carries a tenure of three years. The company has already approached the leading players for the bids and is likely to finalise the deal around the middle of February.

"This is a deliberate attempt by the company to cut the cost of borrowing," sources said.

They also added that the refinancing route has caught the corporate fancy following the prevailing rupee rate in the market, as this is the third corporate in a row to opt for the refinancing route to meet its capital expenditure.

Earlier, both Reliance Industries and Reliance Petroleum availed of the refinancing route to raise $150 million each to fund their individual capital expenditure requirements.

The lead arranger for this loan for Reliance Industries was State Bank of India (SBI) whereas Reliance Petroleum managed the refinancing through Bank of America. According to merchant bankers, the refinancing route is an attempt to cut down on the cost of borrowing as these are floating rate loans and the borrower has the advantage of adjusting the interest rates in tandem with the prevailing market rates.

This is in contrast to issuing bonds where prepayment is not possible and coupon rate is fixed. Rupee rates have been favourable following the accruals of the SBI Millennium Deposits, which has resulted in banks being flush with rupee funds.

Moreover, under the refinancing route the corporates manage to get a better rate for refinancing the residual portion of the existing debt exposure as the tenure is shorter, which in turn minimises the credit risk for the bank.

Merchant bankers are also of the view that owing to the favourable interest rate on rupee funds, foreign currency borrowings have also been lying low as the interest rate differential advantage was not attractive. Further, unlike foreign currency rupee funds do not carry an exchange rate risk, so debt servicing is not a problem .