Construction major L&T is close to striking a Rs 1,000-crore external commercial borrowing (ECB) deal for the Hyderabad metro rail project with India Infrastructure Finance Co Ltd (IIFCL).
“We are at advanced stage and expect to conclude the deal by September. We may even consider additional ECB loans. These ECBs help bring down the interest burden by about four per cent even after including Libor and hedge costs,” said V.B. Gadgil, Chief Executive and Managing Director of L&T Hyderabad Metro Rail Ltd., a special purpose vehicle (SPV) to execute the metro project. Addressing a press conference, he said: “Interest rates have ruled high for quite some time. It is a matter of concern. By accessing these funds we will be able to bring down the overall costs. These loans also come with a tenure of say 20 to 25 years, bringing flexibility.”
While the SPV has achieved financial closure, it has several options to augment additional funds to reduce the impact of high interest rates. Several options are open, including equity partners and suppliers’ credit, said Gadgil. L&T achieved financial closure for the mega project in 2011. This includes Rs 11,400 crore in debt to be met through a consortium of 11 banks lead by SBI. Thus far, L&T has deployed Rs 750 crore.
Referring to the currency fluctuation, Gadgil said most of the contracts were rupee-denominated, and therefore insulted against volatility. However, the increase in input costs and labour are two major issues.
Gadgil said the first stretch of 8 km of the 72 km elevated rail project would be commissioned by Ugadi (March 23, 2015).
Showing reporters the elevated stretch, he said work on rails procured from Tata Steel (Corus), France had begun and the first bunch of rail coaches from Hyundai-Rotem, Korea would arrive by August. One of the coaches would be on display for the public.