After the largest ever public offer in the Indian capital market industry, Anil Ambani-controlled Reliance Power is on the verge of creating another benchmark.
Reliance Power is planning to raise over $4 billion (Rs 17,000 crore) through external commercial borrowings (ECBs) to fund two of its power generation projects. In addition, the company is planning to raise another Rs 10,000 crore. This could be one of the largest debt raising plans in the Indian corporate history so far.
“RBI accorded approval for raising $2 billion each of ECB for both Sasan and Krishnapatnam Ultra Mega Power Projects (UMPPs),” Reliance Power said in a media statement on Friday.
Reliance Power is constructing two UMPPs — one in Sasan in Madhya Pradesh and the other in Krishnapatanam in Andhra Pradesh — with a total project cost of over Rs 32,000 crore.
Earlier this year, the company had raised over Rs 11,700 crore through the public offer. “This will contribute the equity portion of the project, while we are planning to raise further debt,” said a senior Reliance Power official, who did not wish to be named. “The $2 billion ECB will contribute half of the debt portion, while we are planning to raise the remaining through domestic banks.”
ECB is one of the cheapest ways of raising funds from the international markets.
A consortium of international banks, including Standard Chartered Bank, HSBC, and ABN Amro will raise debt for RPower. For the Sasan Project, Chinese development banks will also be part of the consortium.
“We have asked the banks to give a proposal for the lead lender,” the official said. “We are expecting a reply with in a couple of weeks.” Meanwhile, RPower is in talks with a domestic bank consortium led by the State Bank of India to raise as much as Rs 10,000 crore. “There are 15 banks in the consortium,” the official said. “We are in the advanced stages of talks with these banks.”
According to analysts, the ECBs and domestic fund raising were part of the company's expansion plans. “They have already announced a robust debt equity mix,"said Dev Kapadia, research analyst, Lalkar Securities. “I think, the fund raising will fasten the pace of UMPP plans.”