State-owned NTPC on Monday floated a request for proposal (RFP) to raise a total of $750 million, or roughly ₹5,570 crore, through external commercial borrowings (ECB) in the form of a term loan. The country’s largest power utility firm intends to close the process by March 15. The power sector giant has been raising funds from the international markets in the form of term loans and Reg-S bonds under ECB guidelines of the Reserve Bank of India. “NTPC is looking to raise external commercial borrowing (ECB) in the form of term loan amounting to $500 million plus a green shoe option of $250 million, subject to applicable statutory approvals,” the company said in the RFP.
Green shoe option provides price stability and liquidity. It also offers the underwriter buying power to cover short positions if prices fall, without the risk of having to buy shares if the price rises. The average maturity period of the term loan will be seven years under the proposed ECB and NTPC will make the repayments in seven equal annual installments starting from the fourth year. “The loan shall be unsecured, without any guarantee or letter of comfort form the government of India. Negative lien will be provided with carve out for certain permitted borrowing for which security can be created by the company,” the RFP document said. NTPC said it will utilise the loan capital expenditure on ongoing and new capacity addition programmes, including renewable energy (RE) projects, coal mining, and washeries. The proceeds of the term loan will also be used to refinance existing ECB or rupee loans availed domestically. The last date for submission of bids is January 31, and the CPSE will open the bids on the same day. NTPC expects to complete the signing of the facility agreement on or before March 15, 2022 or any date agreed upon by the company. During NTPCs last annual general meeting in June 2021, its board of directors approved a resolution to increase the power generator’s borrowing limit from ₹2 lakh crore to ₹2.25 lakh crore. “The company is in rapid capacity addition mode. The projects, except RE projects, of the company are to be financed by debt and equity in the ratio of 70:30. RE projects are financed by debt and equity in the ratio of 80:20. The main constituents of the company’s borrowings are generally in the form of bonds/ debentures, rupee term loans from banks and financial institutions, foreign currency loans, foreign currency bonds etc,” NTPC said. During FY21, NTPC’s total non-current borrowings including current maturities amounted to ₹1,61,629 crore as against ₹1,52,694 crore in FY20. The company has a debt to equity ratio of 1.37 compared to 1.35 in FY20. The Return on Capital Employed (RoCE) stood at 10.86 per cent compared to 10.46 per cent during the same review period. NTPC incurred a capital expenditure of ₹20,686 crore in FY21 and during FY22, the power producer’s capital expenditure is expected in the range of ₹23,000 crore.