Vizag steel expansion plans attract foreign banks

Citibank, HSBC & Calyon evince interest to finance the project

The Rs 8,250-crore expansion project of Visakhapatnam Steel Plant (VSP) is attracting foreign banks like Citibank, HSBC, France-based Calyon Bank and a few others in a big way.

The company has decided to expand its capacity to 6.3 million tonnes from the existing 3 million tonnes by 2007-08 and these banks have evinced interest in financing the project.

Recently, VSP called for expressions of interest from financial institutions to raise the required funds for its proposed expansion plans.

As per the project report prepared by M N Dastur & Company, the expansion plans of the company are likely to cost close to Rs 8,250 crore, the execution of which would take at least three years. Of the total project cost of about Rs 8,250 crore, close to Rs 5,750 crore would be met from internal accruals.

VSP already has about Rs 3,000 crore invested in various public banks as fixed deposits, which was kept aside since the last five years in the name of depreciation. Now it is planning to utilise these reserves for the expansion project.

The company proposes to raise the remaining funds of about Rs 2,500 crore by way of debt ie, loans, debentures etc, both in Indian rupees and foreign currency. The proposed tenure of the debt is likely to be five years.

"To raise Rs 2,500 crore, we have invited banks, financial institutions and other agencies to either lend or arrange the amount on their own or by way of a consortium," G N Murty, assistant general manager (finance), VSP, told Business Standard.

Of the total project cost of Rs 8,250 crore, the company needs foreign currency of about Rs 1,500 crore to import machinery, he added.

In fact, many Indian and foreign banks have shown interest in financing the entire Rs 2,500 crore on their own without any consortium, he said.

"We have been getting a lot of enquiries even from several foreign banks. Foreign banks like Citibank, HSBC, Calyon Bank, Indian public sector banks like State Bank of India (SBI), Canara Bank, Bank of Baroda and private banks like ICICI have already submitted their proposals. The last date for submitting the proposals is March 31, 2005," he said.

Due to overwhelming response, VSP expects the funds to come at an interest of 5 to 7 per cent.

Money shower

• Of the total project cost of about Rs 8,250 crore, about Rs 5,750 crore would be met from internal accruals
• The steel plant proposes to raise close to Rs 2,500 crore by way of debt for which it has invited banks, financial institutions and other agencies
• Many Indian and foreign banks have evinced interest in financing the entire Rs 2,500 crore on their own without any consortium