Three more months before IOC sees Paradip money
Indian Oil will have to wait for at least another three more months before it sees the money needed to start construction of the proposed 15m t/y refinery at Paradip in Orissa.
IOC is in the process of arranging a Rs14,900cr ($3.54bn) rupee dominated loan through SBI Capital Markets to begin work on the refinery, which was announced 13 years ago. “We have mandated SBI Caps to arrange a rupee loan for us,†an IOC board director confirms.
SBI Caps launched the â€کsyndication’ process to arrange a 14-year loan on August 25, approaching only nationalised banks to raise the money. “They (SBI Caps) are talking to all the 24-25 banks,†says a source in the banking community.
“They have already circulated the â€کterm sheet’ and â€کinformation memorandum’ to the banks.†Our source adds that the entire process will take much more time than expected.
“Banks will start sanctioning the money in a month’s time. After that, SBI Caps will sit with them and negotiate the contract.
Three or even four months can go by before the money is actually disbursed.†Indian Oil estimates the total fund requirement for the Paradip refinery at Rs33,500cr ($7.98bn).
“Earlier IOC wanted to set up an integrated refinery and petrochemical complex,†says an industry source. “That would have entailed an investment of round Rs60,000cr ($14.28bn).
No bank in India, not even a consortium of banks could have funded that much.†IOC, we also learn, was advised by its technical consultant Foster Wheeler and SBI Caps to â€کdefer’ the petrochemical complex for now.
“It might be taken up after the commissioning of the refinery.†Foster Wheeler has prepared the front-end engineering design for the proposed refinery.
Foreign banks operating in India should not feel left out. “IOC will arrange Rs4000cr from extra commercial borrowings or in foreign loans,†adds our IOC source.
Industry observers tell us Indian state-owned banks are confident lending money to IOC since SBI Caps carried out an appraisal of the project some three months ago.