The Reserve Bank of India (RBI) has approved an external commercial borrowing programme of the P D-B G Bangur flagship Shree Cement Ltd for $3 million. The loan is being raised at a rate of 100 basis points above Libor, for a five year period.
According to sources, the loan is being offered by the State Bank of India, New York, with a bullet repayment at the end of five years.
Meanwhile, the State Bank of Bikaner and Jaipur, the lead bankers for the company, have agreed to convert 60 per cent of the working capital demand loan amounting to Rs 7.8 crore into FCNR(B) loans at the rate of 250 basis points above Libor.
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Requisite applications has also been made to the Punjab National Bank to obtain a conversion of the working capital demand loan of another Rs 9 crore into FCNR(B) loans at 250 basis point above Libor. The companys proposal for the conversion has already been recommended by the zonal office of the Punjab National Bank to its board for approval.
In addition, the company is also actively engaged in talks with the Union Bank of India for similar conversion of Rs 4.5 crore into FCNR(B) loans at 250 basis point above Libor.
Shree Cement Ltd, one of the largest cement manufacturing company in the northern region, has been exploring various options to reduce its interest burden including that on long-term loan and working capital requirements by nearly 13 per cent to Rs 40 crore in the financial year 1997-98. To finance the setting up of a Rs 325-crore 1.2 million tonne cement plant at Beawar, Rajasthan, the company had borrowed at a rate of 19 per cent from various financial institutions.
According to estimates, once the company completes its loan agreements for partial conversion of working capital demand loan into FCNR(B) funds and disbursal of $3 million, the annual interest saving shall amount to a minimum of Rs 3 crore per year.