Indian Oil JV firm to raise up to Rs 1,200 crore to finance CBG plant projects

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A joint venture company formed by Indian Oil Corp (IOCL) and biofuels firm GPS Renewables looks to raise up to Rs 1,200 crore, largely through debt, in the coming months to finance setting up of nearly 10 Compressed Bio Gas (CBG) plants across the country, Mainak Chakraborty, CEO and co-founder of GPS Renewables, told Moneycontrol in an exclusive interview.

In June, the two companies formed a 50:50 joint venture, IOCGPS Renewables Private Limited, amid efforts to advance the biofuel adoption across the country as the government is poised to mandate the blending of CBG starting from FY2025-26.

"We are looking at a capital outlay of anywhere between Rs 1,000 crore and Rs 1,200 crore. We will be raising long-term project finance. The debt raise process has just started and focus is on long-term cheap debt, right, the most cost-effective debt,"  said Chakraborty, adding that debt will be jointly raised by his firm and IOCL as project developer.

IOCL did not respond to a request for comments.

When asked about the debt instruments to be used for raising funds, Chakraborty responded, "It's a bit early to say that. We will be exploring all options, with a focus on securing long-term debt from banks." The funds are expected to be raised in the next 12 months with the intention to operationalise the first bundle of CBG projects in the next two to three years.

The financing structure will consist of 70 percent debt and 30 percent equity. For the equity portion, both companies will contribute equally, with each providing 50 percent.

Additionally, Chakraborty flagged that the company has signed two more pacts with oil marketing companies, signalling a strong interest from the sector.

Indian oil majors are pivoting towards biofuels like CBG to enhance energy security, reduce greenhouse gas emissions, and achieve net-zero goals. The push towards CBG and other biofuels aligns with the Sustainable Alternative Towards Affordable Transportation (SATAT) initiative by the Indian government, which aims to develop a sustainable and environmentally friendly fuel alternative.

Founded in 2012, GPS Renewables has pioneered the development and deployment of cutting-edge biogas technologies to convert organic waste into clean energy. Their flagship BioUrja plant is designed for urban organic waste management, converting waste into biogas and organic fertiliser.

The company was instrumental in commissioning  BioCNG plant in Indore, which is touted to be the  Asia's largest. CBG is produced by the anaerobic digestion of organic waste materials such as agricultural residue, manure, and food waste. The biogas generated in this process is then purified to remove impurities and compressed to produce CBG.