Anil Ambani-controlled Reliance Power is in talks with a consortium of domestic banks to raise as much as Rs 10,000 crore to fund its Krishnapatanam ultra mega power project. The company has appointed Industrial Development Bank of India (IDBI) as a lead banker for the consortium.
Reliance Power, which is developing two ultra mega power projects with a total investment of Rs 32,000 crore, has announced its intention to raise Rs 26,000 crore through a combination of rupee and external commercial borrowings (ECBs). An amount of $4 billion (Rs 16,000 crore.) will be raised through ECBs. SBI has been mandated to mop up Rs 10,000 crore for its Sasan ultra mega power project. In total, the company will raise close to Rs 36,000 crore to fund its Sasan and Krishnapatnam projects.
“ECBs and the domestic funds will form the debt part of our ultra mega power projects,” said a top Reliance Power executive, requesting anonymity. “Our IPO proceeds will contribute to the equity portion.”
Reliance Power has raised as much as Rs 11,700 crore through an initial public offer in January.
Reliance Power shares were closed at Rs 169.90 up 2.78 per cent at the Bombay Stock Exchange on Friday.
Reliance Power is targetting a generation capacity of over 28,000 mw over the next few years.
This would attract an investment to the tune of Rs 1.1 lakh crore considering an expenditure of Rs 4 crore to generate one megawatt of electricity.
According to analysts, power generation companies with high leverage are likely to be adversely affected during an increased interest rate scenario.
The company is moving ahead with its fund-raising plans at a time when interest rates have peaked.
“Generally, power projects are highly leveraged, and are 70-80 per cent debt-funded,” said Edelweiss analysts K Shankar and Abhineet Anand in their report on Indian power sector.
“Hence, the sector is highly susceptible to rising interest rates, especially in the current scenario when all major players are undergoing expansion.”
Recently, the Reserve Bank of India had raised the interest rates to control inflation, which is hovering around 12 per cent.
The central bank hiked the cash reserve ratio by 0.25 per cent and short term lending rate to banks or repo rate by 0.50 per cent.