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Wednesday, Apr 17, 2002

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Narmada bond mops up Rs 350 cr, hopes to garner Rs 150 cr more

Vinod Mathew


THE Sardar Sarovar Narmada Nigam Ltd (SSNNL), the nodal agency executing the Sardar Sarovar Project (SSP), is out wooing investors yet again. The latest private placement of the Narmada bond (Series III), which has been under way since February last and is scheduled to close on April 30, has mopped up Rs 350 crore till date.

Talking to Business Line, Mr I. P. Gautam, Director (Finance), SSNNL, said the private placement of the Narmada bond was originally for Rs 250 crore, which was met on April 2. As the issue structure allowed a green shoe option up to Rs 500 crore, SSNNL was going for the over-subscription portion as well, he said.

``As of April 15, we have collected Rs 350.4 crore from 30 investors. We are quite confident of touching Rs 500 crore in the coming 10 days as we are in touch with the potential investors who together will bring in another Rs 150 crore. This is the eighth Narmada bond issue overall and we have on hand around Rs 4,000 crore thus raised,'' Mr Gautam said.

The current private placement is set to raise the funds raised by SSNNL from the market, both public and private, to Rs 4,500 crore. The SSP, whose cost estimate had stood at Rs 26,000 crore some two years back, has incurred an expenditure of Rs 12,098.85 crore as of December 31, 2001.

It is been the practice at SSNNL for some time now to utilise the market borrowings for meeting capital cost just as a good portion of the budgetary allocation went towards repaying the market borrowings. The average annual budgetary allocation to SSNNL pans out to around Rs 900 crore.

The latest Narmada bond issue comes in the backdrop of a particularly severe report of the Comptroller and Auditor General (CAG) of India for the year ended March 2001. Not too impressed about the manner in which funds for the Narmada project are being handled both by the Gujarat Government and the SSNNL, it castigates the State Government for choking the project of funds, resulting in SSNNL being forced to take recourse to high cost funds through market borrowings.

``The State Government had not released Rs 1,275.02 crore out of Rs 7,605.65 crore during 1988-89 to 2000-01 period. Further, permission for withdrawing the funds were not given resulting in accumulation of balance of Rs 1,381.30 crore in the Personal Ledger Account (PLA) as on March 31, 2001,'' the CAG report said, adding that this has resulted in additional expenditure on account of interest charges to the tune of Rs 220 crore for the said period.

These are some of the areas where SSNNL has erred, as per the CAG report:

* The last approved figure by the Planning Commission for the SSP was Rs 6,406.06 crore at 1986-87 prices. The subsequent cost estimate of Rs 13,180.62 crore at 1991-92 prices is yet to be approved by the Sardar Sarovar Construction Advisory Committee.

* Due to non-reservation of rights to redeem earlier bonds through a call option, the company was set to suffer `an avoidable loss' of Rs 3,033.45 crore by way of interest cost on redemption of the existing bonds.

* Company borrowed Rs 557.87 crore in excess of requirement in September 1999 and deposited Rs 1,009.73 crore thus collected in banks at lower interest rates.

* Dues outstanding from all beneficiary States (Gujarat, Maharashtra, Madhya Pradesh and Rajasthan) stood at Rs 5,023.65 crore on March 31, 2001, resulting in loss of Rs 1,209.79 crore in interest as the amount had to be raised from market.

Meanwhile, the entities which have parked large amounts with the SSP through the current Narmada bond included some of the public sector banks, insurance companies, state co-operative banks and a handful of PSUs, already coming good for Rs 350 crore and promising more.

Clearly, if there is one project in Gujarat where investor confidence is still riding high, unaffected by the troubled times the state is going through, it is the SSNNL.

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