Gail Going For $150-M ECB In April

New Delhi, March 27 | Updated: Mar 29 2004, 05:30am hrs
Close on the heels of a successful IPO in the domestic market, Gail India Ltd is planning to shortly approach the overseas markets for raising external commercial borrowings (ECBs) of $100 million with a green shoe option to retain additional $50 million.

With the recent relaxations in Reserve Bank of Indias (RBIs) guidelines, ECBs have emerged as one of the attractive sources with corporates for raising medium-term debt at competitive rates. Company officials said at present there appears a tight supply of ECBs as most foreign banks have reached limits of India exposure and nationalised banks have limited availability. Therefore, most of the ECBs are being raised through the mode of syndication.

Chairman and managing director, Gail, Proshanto Banerjee said the company plans to approach the ECB market during April and the proceeds will be used for meeting the capital expenditure requirements. The planned capital expenditure has been estimated at Rs 3,744 crore of which Rs 1,800 crore is likely to be incurred on the Dahej Uran and national gas grid pipeline projects by Gail.

Besides pipelines, the company has also planned investments in petrochemicals, exploration and production and related acquisitions. During current financial year, Gail incurred an expenditure of Rs 1,937 crore on the Dahej Vijaipur pipeline project for transporting re-gasified LNG.

The cost of an ECB is generally based on six months floating Libor (currently 1.2 per cent) plus a spread presently ranging between 150 and 175 basis points over Libor. Officials said the floating cost of a US dollar ECB, average maturity of five years, shall work out to be around 3.5 per cent to 3.75 per cent in dollar terms. After including the hedging costs for conversion into rupee terms, the cost of an ECB (5 years) would work out to be around 4.25 per cent per annum (floating) to 6.25 per cent per annum (fixed). The ECB at floating rate and without hedging is exposed to variations in both interest and foreign exchange rates.

Mr Banerjee said in the current financial year, the company has restructured most of its high cost debts which has resulted in major interest savings. The company has prepaid loans to ADB, JBIC and ICICI Bank and is now planning to prepay the balance ADB loan of US$90 million during March 2004. Further the company has mobilised Rs 1,600 crore from the rupee markets by way of bond issues and the term loans.