Essar Oil is planning to raise the capacity to 34mt by December 2011 in its second phase of expansion. The project cost for the first phase is estimated to be INR78 billion. Out of which, INR46 billion is to be raised through the debt and the rest through equity. This means the project has about 60:40 debt to equity ratio.
According to an SBI executive, the company has managed to tie up this money at the current prime lending rate (PLR) of 11.75%.
“This is primarily a rupee loan with a very small foreign currency component,” the executive said, without divulging further details. He didn’t want to be identified as he is not supposed to talk on a particular borrower.
Essar Oil finance director P. Sampath said it is not difficult to service these debt levels as the firm is raising capacity and technical competence. “We are increasing the Nelson complexity of our refinery from 6.1 to 11.8 for our phase I expansion plan. With this upgradation, it will not be a difficult task to service huge loans.”
Sampath said the promoters have already brought in Rs1,200 crore. “The remaining fund will be sourced through internal accruals and equity.”
