Power transmission developer Sterlite Grid 32 Limited has raised Rs 2,450 crore through non-convertible debentures (NCDs) to refinance loans for its Mumbai Urja Transmission Ltd project, one of the biggest such projects in its portfolio, the company said on January 6.
The funds were raised from the National Bank for Financing Infrastructure and Development (NaBFID) and India Infrastructure Finance Company Ltd (IIFCL), the company said. NCDs are rated AA+ stable.
“There was demand from mutual funds, insurance companies, and private banks. However, they were outpriced by NaBFID and IIFCL. This was a coupon-based bid, and we were able to secure exceptionally competitive pricing,” Raji George, Director Corporate Finance, Sterlite Power, told Moneycontrol.
Sterlite Power Transmission's infrastructure business demerged into Sterlite Grid 5 Ltd (SGL5) effective October 8. SGL5 recently entered into a joint venture with Singapore sovereign wealth fund GIC following which it will execute all its transmission projects in India through Sterlite Grid 32.
Sterlite won Mumbai Urja Transmission project in June 2020 to execute the green energy corridor project on build, own, operate, maintain (BOOM) basis for 35 years. The project is critical for strengthening the transmission system in the Mumbai Metropolitan Region, with the potential to carry more than 2,000 MW of additional power to Mumbai and Navi Mumbai.
The refinancing helped the company not just reduce interest costs but also provided additional liquidity, George said.
“Firstly, we achieved significantly better pricing. For instance, during the construction phase, the pricing was 9.75 percent. After refinancing, it was reduced to approximately 8 percent. This represents a compression of around 1.75 percent,” said George.
“Additionally, the original loan amount of Rs 2,070 crore was refinanced with a top-up to Rs 2,450 crore, releasing approximately Rs 380 crore of equity. This freed-up equity can be redeployed as funding for other projects, enhancing overall efficiency.”
While the company explored the option of raising funds overseas, the high interest rates and depreciating rupee did not make offshore financing a viable alternative, he said.
“We explored all available options, including the issuance of offshore bonds. However, considering India's sovereign rating of BBB- and the fact that a transmission project that has just achieved COD (commercial operation date) would likely receive a maximum rating of BBB-, the economics did not work in our favour.
"With SOFR (Secured Overnight Financing Rate) at around 5 percent and a country risk premium of approximately 2 to 2.5 percent, the pricing would have been in the range of 8 percent in dollar terms, give or take 50 basis points. Even at 7 to 7.5 percent, once you factor in the hedging costs for both the dollar and SOFR, the effective pricing would have been significantly higher,” George said.
Sterlite Grid 32 has 10 completed and under construction power transmission projects in seven states of Rajasthan, Gujarat, Karnataka, Haryana, Maharashtra, Goa and Kerala and union territory of Jammu and Kashmir covering approximately 4,500 km of transmission lines, through a total capex of Rs 25,000 crore.
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