Sethusamudram project lines up foreign loan

Sethusamudram Corporation, the special purpose vehicle (SPV) for the Rs 2,427.40 crore Sethusamudram Ship Channel Project (SSCP), will raise a foreign currency loan of over $100 million. It has also decided to hit the capital market with an initial public offer (IPO) of Rs 227 crore.

"Out of the Rs 2,427.40 crore, the equity portion will be Rs 971 crore and the remaining amount will be through debt including foreign currency loan, domestic term loans and issue of zero coupon bonds. UTI Bank has been appointed to handle fund arrangements for the project and the financial closure is expected on October 30," N K Raghupathy, chairman, Tuticorin Port Trust said.

"Currently, we are holding roadshows to attract foreign institutional investors (FIIs) in Singapore and Hong Kong. We will be raising more foreign currency loans if the interest is favourable for us. Also, we will raise term deposit from financial institutions and issue zero-coupon bonds," he said.

The Sethusamudram project envisages dredging of a ship channel across the Palk Strait, that lies between India and Sri Lanka, which would allow vessels sailing between the Indian east and west coast to pass through India's territorial waters, instead of having to circumvent Sri Lanka.

This would save up to 424 nautical miles and 32 hours of sailing time. Raghupathy said the corporation would enter the capital market with its IPO at an appropriate time after settling the necessary financial arrangements.

Tuticorin Port is the nodal agency for the project. The government will contribute Rs 495 crore towards the SPV while the Shipping Corporation of India would invest Rs 50 crore.

Dredging Corporation of India, Chennai Port Trust, Ennore Port Trust, Visakhapatnam Port Trust and Paradip Port would contribute Rs 30 crore each.

The corporation is expecting to break-even in 16 months from the date of operation. The dredging work would start in January and the channel would be operational by early 2008, he said.