Jindal Steel & Power Limited (JSPL), one of India's largest steelmakers which owns the Jindal Shadeed Iron and Steel plant in Sohar, has raised US$475mn in India through the takeout financing route to fund its expansion programme in Oman.
JSPL said that the company raised the loan at 225 basis points over the Libor (London interbank offered rate), for a tenor of five years, with ten banks participating in the transaction.
JSPL's takeout loan transaction is one of the largest such transactions by a company in India. Take-out financing provides loans for longer duration projects (of about 15 years) by banks sanctioning medium-term loans for five to seven years. It is an understanding that the loan will be taken out of books of the financing bank within a pre-fixed period by another institution, thus preventing any possible asset-liability mismatch. After taking out the loans from the banks, the institution could offload them on another bank or keep it.
D K Saraogi, executive president of Jindal Shadeed and head of JSPL's Oman operations, told Muscat Daily, "The major part of this loan will be used to finance the expansion programme in Oman. And some money is likely to go for technology and technical purchases outside Oman."
Saraogi, however, did not divulge details of the investment plan in Oman for the next phase of expansion. "We are trying to take the capacity up to 5mn tonnes (MT) by 2015-16. Until the expansion programme is initiated we cannot divulge details of investments."
Saraogi said that in due course it will get pellets from JSPL's plant in Bolivia. "The Bolivia plant will take almost two years to start operations and after that we can
get pellets from there. So far we got only one ship from India and rest have come from other sources."
JSPL acquired Shadeed Iron and Steel company in May 2010 from Abu-Dhabi's Al Ghaith Holdings for US$464mn. The US$500mn integrated steel complex of Jindal Shadeed was dedicated to the nation at the Port of Sohar in May this year. The current capacity of the plant is 1.5MT per annum of hot briquetted iron (HBI) and hot DRI (HDRI).
JSPL shares surged over three per cent on the Bombay Stock Exchange on Monday.
© Muscat Daily 2011
