Finance modes of Lanco, Tata Power different

The two winners of the ultra mega power projects "" Tata Power and Lanco Infratech "" are looking at different modes of financing their respective projects.

While Tata Power is considering borrowing around Rs 7,000 crore from the overseas market for the Rs 20,000 crore Mundra project, Lanco Infratech, the Hyderabad-based power and realty company, is considering a "mostly rupee borrowing" strategy for the Rs 16,000 crore Sasan Project.

Under the terms and conditions of the ultra mega power projects, the companies have a 12 month outer limit to complete the financial closure of the projects.

A source in the Inter Institutional Group (IIG) set up to fast-track financing for power projects said that if the companies approach them, financing could be "facilitated and expedited."

Lanco Infratech Managing Director Venkatesh Babu said that his company would be mainly approaching the Indian financial institutions.

"Most of our borrowing would be rupee borrowing," he said. Babu also said that the project is being structured on a 80:20 debt equity ratio, with both the partners "" Britain's Globleq and Lanco "" holding 50 per cent equity in the special purpose vehicle.

Both companies would be contributing Rs 1,600 crore towards equity, while the remaining, Rs 12,800 crore, would be the debt component.

Babu refuted any possibility of diluting the group's holding in the company. "We don't need the money right now and we are confident of funding the equity requirement out of our internal accruals."

On the other hand, agencies reported that Tata Power was likely to raise Rs 5000-7000 crore from overseas market, including external commercial borrowings (ECB).

Tata Power executive director (finance) S Ramakrishnan had yesterday said that the company has appointed SBI Capital Market as its advisor for raising the necessary funds.

The project would be implemented in a debt-equity ratio of 70:30. The company would raise about Rs 10,000-11,000 crore from domestic markets and financial institutions, he had said.

When contacted, Tata Power, however, denied that they were considering an ECB option. "We have time until February 2009 to finalise our financing options," a company executive said.