Hudco lines up Rs 2,000 crore corporate lending plan

Housing and Urban Development Corporation Ltd (Hudco), digressing from its core activity of financing housing infrastructure development, has lined up corporate lending worth Rs 2,000 crore.

This is a part of the company's plan to participate in corporate lending under urban infrastructure development financing.

The company has already tied-up with four power companies for providing around Rs 2,000 crore of long term credit.

Sources close to the development said Hudco has already provided a long term credit line to Uttar Pradesh Power Corporation of Rs 300 crore, while it has finalised a Rs 400 crore long term loan with Rajasthan Power Corporation.

The third is a Rs 600 crore line of credit to Orissa based Grid Corporation. Hudco has also entered into talks with another power utility for a Rs 600 crore loan which was expected to be finalised in the next couple of weeks.

The housing finance major had in fact targeted a Rs 700 crore disbursement in 2003-04, while the rest of the fund will be advanced in the next fiscal.

The loan to Gridco is for seven years, including a moratorium of two years, at 8.5 per cent rate of interest payable in monthly instalments from the 25th month.

This will allow Gridco to save on interest outgo because the fund was being borrowed by the power utility for retiring high-cost debt with the cheaper one from Hudco.

The loan being provided to Gridco is guaranteed by the government of Orissa. The Orissa state government has in fact provided a Rs 1,000 crore irrevocable guarantee to Gridco for financial restructuring "" which included debt swapping.

Payment of interest shall be computed at quarterly rests and also the contribution towards redemption of the principal amounts will be made through the "Escrow Account Mechanism" from the revenue to be generated on account of supply of power by GRIDCO to two distribution companies, namely, Southern Electricity Supply Company of Orissa and Northern Electricity Supply Company of Orissa only, in the event, the receivables of Southco is inadequate to cover the repayment liabilities, receivable towards transmission of bulk supply of power and other allied services.

The proposed borrowing for replacement of high-cost debt of Rs 600 crore will save interest costs substantially, of around 4 per cent to 6 per cent per annum to Gridco.

The structure for other loans and the rate of interest were more or less the same for other companies too, where Hudco is basically lending for debt restructuring.