Tatas, Lanco weigh funding plans

While the Hyderabad firm eyes domestic market, Tata Power to tap overseas.

Tata Power and Lanco Infratech "� the two winners of ultra-mega power projects "� are looking at different modes of financing their respective projects.

The former is considering borrowing around Rs 7,000 crore from overseas markets for its Rs 20,000 crore Mundra project. Lanco Infratech, power and realty company based in Hyderabad, is weighing a "mostly rupee borrowing" for the Rs 16,000 crore Sasan project.

Under the terms and conditions of the projects, the companies have a 12-month outer limit, within which they have to complete the financial closure of the projects.

A source in the Inter Institutional Group "� set up for fast-track financing for power projects "� said if the companies approached the group, financing could be "facilitated and expedited".

Lanco Infratech Managing Director Venkatesh Babu said the company would primarily be approaching domestic financial institutions. "Most of our borrowings would be rupee borrowing," he said.

Babu also said the project was being structured on a 80:20 debt-equity ratio, with both the partners "� Britain's Globleq and Lanco "� holding 50 per cent stake in the special purpose vehicle. Both the companies would contribute Rs 1,600 crore towards equity, while the remaining Rs 12,800 crore would be debt component.

Babu refuted any possibility of diluting the group's holding in the company. "We don't need the money right now and are confident of funding the equity requirement from our internal accruals."

Agencies reported that Tata Power was likely to mop up Rs 5000-7000 crore from overseas markets, including external commercial borrowings (ECB). S Ramakrishnan, executive director - finance, Tata Power, had yesterday said the company had appointed SBI Capital Market its advisor for raising the necessary funds.

The project would be implemented in a debt-equity ratio of 70:30. The company would mobilise about Rs 10,000-11,000 crore from domestic markets and financial institutions, he had said.

When contacted, Tata Power denied considering the ECB option. "We have time until February 2009 to finalise our financing options," a company executive said.