Debt to achieve financial closure for the new 1.5-million-tonne a yr Utkal refinery.
Hindalco Industries, India’s largest aluminium maker, is in the process of raising over Rs 4,500 crore as debt to achieve financial closure for Utkal Alumina Refinery, a new 1.5-million-tonne per annum project in Orissa.
The refinery is expected to start production from July 2011 and the order for machinery has been already placed. It involves an estimated Rs 6,500 crore of planned capital expenditure, about 30 per cent of which is being put up as equity by the company, while the rest is being raised as debt.
“With interest rates hitting an all-time low, this is the right time to raise debt in Indian currency,” said a banker familiar with the development. Another banker with knowledge of the deal said the company is raising a term loan against the project. Such financing is usually called project finance in banking parlance.
The company declined comment. SBI Capital Markets, IDBI Bank and ABN Amro are doing joint syndication for the transaction, expected to be closed in about three to four weeks. 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 qualified institutional placements last month. 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, primarily due to Canadian subsidiary Novelis, which reported Rs 8,769 crore loss in that year. 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 thermal power plant with respective capacities of 359 ktpa and 900 Mw. This is also slated for production in July 2011. Bankers say this would be the next one for achieving financial closure after Utkal Alumina.
Aditya Alumina and Aluminium is another new project planned as an integrated aluminium complex in Orissa. The project includes a 4.2 million-tpa bauxite mine, a 1.5 million-tpa alumina refinery at Kansariguda and a 359-ktpa smelter at Lapanga. The refinery is expected to produce 2 million tpa within three years of its startup. The smelter is expected to start production by October 2011, while the refinery is proposed to be completed by June 2013.
