Rural Electrification Corporation (REC) will now go the Japanese way to raise funds.
The power sector lender is looking to take a yen-denominated loan of at least $150 million by February 2012, and is likely to be the first Indian firm to borrow in Yen in calendar year 2012.
“We will be going for a syndicated loan of at least $150 million in Japanese yen in February,” H D Khunteta, finance director, REC, told Business Standard. “If we are able to garner more funds, then we may look at $250 million as the upper limit. We should be able to get the loan by February end.”
The government-controlled non-banking financial company has opted for yen-denominated loan because it is available at cheaper rates than dollar loans. “We will be able to raise the loans at around LIBOR plus 275 basis points in yen. For dollar loans, the cost will be around LIBOR plus 325 basis points,” Khunteta said.
The Japanese loan is much cheaper, he explained.
The tenor of the loan will be five years and Bank of Tokyo Mitsubishi is the arranger. The power sector lender has been actively looking at alternative currencies for meeting its funding requirements. REC will also be doing roadshows between January and February in Switzerland to raise $200 million via Swiss bonds.
“REC has raised a total about Rs 21,000 crore in this financial year. The proceeds of the Japanese loan will be used for meeting our disbursal target of Rs 28,000 crore,” Khunteta added.
Due to risk aversion and dollar crunch, raising funds via dollar denominated bonds and loans has become more expensive as investors ask for higher yields and lenders ask for higher spreads over the LIBOR. Earlier, EXIM Bank has raised funds via Samurai bonds — instruments issued in Tokyo by non-Japanese company and subject to Japanese regulations.