In a break from convention, the National Highways Authority of India (NHAI) on Friday concluded an agreement with State Bank of India (SBI) to raise Rs 25,000 crore from the country’s largest bank as an unsecured loan, mainly to finance fully-state-funded engineering procurement and construction (EPC) projects.
NHAI, which implements around a third of highway projects via the EPC route, gets a third of the funds from the Union budget and its borrowings have largely been through government-guaranteed bonds, lapped up by the likes of LIC and EPFO.
The authority has already raised Rs 10,160 crore through bonds against its Rs 62,000-crore borrowing target for this fiscal.
NHAI has a target to construct 6,000 km highways in FY19 compared with 3,500 km in FY18.
The 10-year loan from SBI, with a 3-year moratorium on repayments, is competitively priced at 7.99%, only marginally higher than the bank’s one-month Marginal Cost of Funds Based Lending Rate (MCLR) of 7.9%. The SBI funds for NHAI would be cheaper than raised by the authority from LIC and National Small Savings Fund (NSSF) recently, a senior NHAI official said, when asked the unsecured loan wouldn’t impact its credit rating.
“NHAI’s rating is at par with the sovereign government. If somebody is giving us unsecured loan, it is due to his perception (of us). We will not get long-term loans cheaper than this anywhere,” the official added.
NHAI has recently raised Rs 4,000 crore from LIC at 8.51% and Rs 5,000 crore from NSSF at 8.33%, with both loans having tenures of 10 and 30 years, respectively. It has also mobilised Rs 1,160 crore through the issuance of 54EC tax-saving bonds.
The NHAI official said SBI and some other banks responded to a tender inviting expression of interest (EoI) from scheduled commercial banks for Rs 25,000-crore unsecured loan. While SBI itself offered the entire amount, the cumulative offers from others were to the tune of Rs 19,000 crore. NHAI would consider taking loan from these banks also in case it finds the offers lucrative, the official added.
NHAI can repay/prepay the SBI loan at any time without any prepayment penalty. There is no principal repayment liability for initial three years. After three years, the repayment would be done in 14 equal half yearly instalments. NHAI can draw the amount in any number of tranches, latest by March 31, 2019.
SBI chairman Rajnish Kumar, who was present at the occasion of signing of the agreement, said, “When the MoU was being negotiated, we decided that we will take some calculated, limited risk… Considering the state of regulations in the country, it is better to fund NHAI than contractors,” Kumar said.
Minister for road transport and highways Nitin Gadkari asked the lenders to come forward and become a part of the infrastructure sector’s growth story. “The sector has become economically viable with a good internal rate of return,” Gadkari said.