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C. Shivkumar

Bangalore , Feb. 19

ITI Ltd has begun discussions with a clutch of banks and financial institutions to offer a financial package for all the equipment supply tenders it intended to participate.

Banking sources said the telecom equipment maker was in discussions with banks and the financial institutions to finalise a vendor-financing package.

This kind of an arrangement would allow the telecom equipment maker to jointly bid for equipment supply along with the bank/FI. ITI when contacted confirmed the discussion, and added they were still in the early stages. But the sources said, "For all our future bids we intend having a financial package in place, like multinational companies."

Most of the multinational companies which have bid for equipment supplies to domestic telecom service providers, including the Bharat Sanchar Nigam Ltd (BSNL), and to private sector entities like Reliance Infocomm have been able to provide extremely competitive vendor-financing packages. Reliance had procured equipment from the international markets taking advantage of the low interest financing package offered by suppliers like Lucent and Qualcomm.

ITI, the sources said, intended taking advantage of the low interest rates in the domestic markets to offer the financing packages. Some of the FIs/banks, the sources said, were in a position to meet the vendor credits at rates below the prime lending rates.

Many of the FIs/banks were providing funds to PSU borrowers at spreads as thin as 40 basis points (0.4 per cent) over sovereign yields.

The sources said that that ITI would also make a pitch for the equipment supply bids to the private sector WLL/CDMA (Wireless in Local Loop / Code Division Multiple Access) service providers like Reliance and Tatas leveraging on the technology and the financing package for meeting their future requirements.

Although ITI had lost out in the initial race, demand for equipment from all the three service providers was expected to rise in the coming months, the sources said, given the pace of WLL penetration by the private sector players. Accordingly, domestic suppliers would also need to offer competitive packages not just in technology or pricing, but also low cost vendor credit, the sources added.

But ITI is not the first PSU to attempt such a synergy with the financial institutions/banks for equipment supply. Another public sector, BHEL, has already tied up with the State Bank of India for providing financing package for supply of power generation equipment to various utilities. It has used this arrangement to successfully bid for equipment supply contracts to power utilities in the country.

Such arrangements, the sources said, help reduce the working capital requirements substantially, by improving the cash flows. This implied that interest costs are also considerably reduced. Such an arrangement would also help improve credit offtake of the banks.

The arrangement, the sources said, would be used for the next round of bids for supply of CDMA lines to the BSNL. ITI is likely to supply a CDMA network with a capacity to service 2,25,000 subscribers to the BSNL during the course of the year. This year it has supplied a network equivalent to 1,50,000 subscribers.

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