Hindalco Industries, India’s largest aluminium maker, has received a loan commitment of over Rs 10,000 crore from more than 10 banks for the Rs 4,900-crore debt the company plans to raise for its Utkal Alumina Refinery — a 1.5-million tonne per annum (mtpa) project in Orissa.
The debt syndication was launched in the third week of December by Hindalco’s bankers, SBI Capital Markets, IDBI Bank and ABN Amro. “More than 10 banks, including State Bank of India (SBI), have given a commitment to the debt proposal of the company,” said a banker familiar with the development.
The formalities of the debt syndication would be completed by the end of next week, the banker added.
Canara Bank, Bank of Baroda, Bank of India and IDBI Bank are some of the other banks that have given a similar commitment to lend to the company for the project.
Since the commitment is for an amount that is more than required, the debt sought could be proportionately distributed among the banks.
The refinery is expected to start production from July 2011 and the order for machinery has been placed. It involves an estimated Rs 6,500 crore of planned capital expenditure, 25 per cent of which is being put up as equity by the company, while the rest is being raised as debt.
The company is raising a term loan against the project for 10 years. Such financing is usually called ‘project finance’ in banking parlance. The interest rate for the loan is going to be 11.25 per cent — slightly lower than the prime lending rate of SBI at 11.75 per cent.
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The company has capital expenditure plans of over Rs 23,000 crore for the next three years, including other new plants in Orissa, Madhya Pradesh and Jharkhand.
Hindalco plans to fund 30 per cent of its total capital expenditure through equity infusion and internal accruals. It raised Rs 2,900 crore by selling fresh equity in a qualified institutional placement in November. It is now tying up the debt component for the projects.
Its revenue for the last financial year was Rs 65,414 crore, while net profit was reported at Rs 485 crore — down from Rs 2,193 crore in the previous year. This was primarily due to the Canadian subsidiary, Novelis, which reported a Rs 8,769-crore loss.
The subsidiary is expected to make Rs 5,000 crore of operational profit from the financial year 2012-13, according to the company estimates given in the annual general meeting a few months earlier.
In Madhya Pradesh, the company is setting up Mahan Aluminium, a complex of smelters and a thermal power plant with capacities of 359,000 tpa and 900 Mw, respectively. This is also expected to commence production in July 2011. Bankers said this project would be the next one to achieve financial closure after the Utkal Alumina one.
Aditya Alumina and Aluminium is another new project planned as an integrated aluminium complex in Orissa. The project includes a 4.2-mtpa bauxite mine and a 1.5-mtpa alumina refinery at Kansariguda as well as a 359,000-tpa smelter at Lapanga.