Armed with favourable credit ratings, Rashtriya Ispat Nigam Ltd would hit the debt market with Rs 500 crore borrowing plan in the fourth quarter. Sources told Business Line that the proposal would be placed before the RINL board for clearance next month.
This would be the first tranche of the Rs 22,500-crore 10-year borrowing plan. Though the board had earlier cleared the long-term plan, poor market condition forced the management to modify the plan several times in the past two years, including quantum of the tranches and the implementation schedule.
Care and Crisil have assigned AA+ and AA ratings, respectively, with a stable credit outlook for RINL. A top company official said that going by the current trend, the Rs 500-crore borrowing with five-year tenure was expected at a maximum rate of around 9.2-9.3 per cent.
“Even if RBI does not send fresh signal for further rate cut by end of this calendar year, debt market has relatively stabilised and in fourth quarter it hoped to improve,” said a banker.
At present, RINL does not have any term loan in its books. But it has resorted to short-term borrowings of about Rs 3,000 crore to meet working capital needs.
The short-term loans tenures are also favourably poised at this moment. Though the loan duration varies between 30 days and a year, 180-day borrowings are predominant.
So far, internal cash generation saw the steel maker through the graded expansion programme.
Since RINL’s equity base is bloated at Rs 7,827 crore (of which Rs 2,837 crore -- as on March 31, 2012 -- was redeemable preferential shares), it has decided to raise funds through debt and reduce equity.
RINL has undertaken phased redemption of the preferential shares and complete the extinguishment by 2015-16.
This year, so far, it has redeemed the seven per cent redeemable preference shares worth Rs 1237 crore and another Rs 150 crore is to be spent by March 31 next year, on this score.