Sagar Cements awaits RBI nod for IFC loan

Hyderabad-based Sagar Cements Limited is awaiting Reserve Bank of India's clearance for Rs 76 crore ($20 million) loan from International Finance Corporation, Washington, to fund its Rs 295-crore brownfield expansion project, which is currently under way.

Sagar Cements' director S Srikanth Reddy said the company had received in-principal approval from IFC for the loan, which comes at 10 per cent rate of interest.

"We are awaiting the approval of RBI for the IFC loan which is to be given in Indian currency. But, we are not worried even if the RBI takes time since there is a back-up plan already in place," he told Business Standard.

The principal lenders to the company's expansion project have already conveyed their readiness to take care of this additional loan component as well, according to Reddy.

This alternative arrangement to meet the funding requirement is even more crucial to the company, which is planning to complete the project in less than 18 months and two months ahead of the schedule, in June 2008. "We are ahead of schedule on all fronts of the project work at present," he said.

The company is raising Rs 195 crore debt and Rs 100 crore by way of equity and through internal accruals. IDBI, State Bank of India and State Bank of Hyderabad will be providing Rs 100 crore, Rs 45 crore and Rs 50 crore respectively, according to Reddy.

On the equity front, the promoters are putting Rs 16.5 crore into the project while the company has issued 1 million equity shares to Blackstone's India Development Fund at a premium of 190 per share for a total consideration of Rs 19 crore.

With the proposed capacity of 1.5 million tonne clinker and 2 million tonne cement under the current expansion, the company's cement production will touch 2.75 million tonne from 1.5 million tonne capacity, which is currently being achieved by reengineering and debottlenecking of the existing line.

It expects to scale up its turnover to Rs 653 crore post expansion from Rs 112.5 crore last year.