Adani Transmission is increasing up to $1.15 billion through offshore loans to fund at least four projects in Gujarat and Maharashtra, three people aware with the matter said, in what could be the first such large project supporting deal amid an economy wracked by the Covid-19 pandemic.
At least four banks, including Standard Chartered, MUFG, Barclays and JPMorgan, are expected to syndicate the proposed loans, said the people.
“The company is working on a dedicated structure through which the whole sum will be raised for those four projects,” said one of the people.
The four include the Western Region Strengthening Scheme (WRSS), Lakadia Banaskantha Transco (LBTL), Kharghar Vikhroli Transmission (KVTL) and the Mumbai High Voltage Direct Current (HVDC) project.
WRSS, LBTL and KVTL have a project completion deadline of August 2022. The total project cost is about $1.55 billion, with the HVDC project forming closely one-third of that.
The loan could primarily be for five years and priced after adding a spread, or mark-up, to the London Interbank Offered Rate (LIBOR).
The spread would be finalised after factoring in project implementation and refinancing risks of the lenders, who are cautious considering the economic cost of Covid-19.
The Ahmedabad-based firm is, nevertheless, expected to refinance the loan after 12-15 months through long-term overseas bonds.
“The proceeds will fund the first three projects fully and the fourth project partly,” stated a senior executive involved in the exercise.
Adani Transmission, one of the largest private sector transmission companies in India, would primarily raise about $700 million from a group of foreign lenders, who would then extend another $450 million credit line to HVDC, which has a completion deadline of January 2025.
“The second leg of the credit line may happen at the time of refinancing next year, for which a deal is being finalised now,” another market source claimed, adding that it would take a few weeks to kickstart the mega funding programme.
Adani did not answer to some queries till press time Sunday. The individual banks could not be contacted instantly for comments.
One-fourth of the total project cost will be infused through equity by Adani’s promoters.
“In the face of the potential sizeable capital expansion anticipated, management's ability to instil a sustainable capital structure that would balance the group's growth aspirations with its commitment to maintaining an investment grade credit profile would be critically important,” told Spencer Ng, a vice president and senior analyst at Moody's, in a note lately.
Moody’s Investors Service has preserved its ‘Baa3’ rating with ‘negative’ outlook - the lowest rank in the investment grade category – for Adani Transmission.
The firm reported an 82% jump in net profit to Rs 1,290 crore in fiscal year 2020-21. Net debt to Ebitda (Earnings before interest, tax, depreciation and amortisation) -- a measure of leverage or liabilities in proportion to cash equivalent -- stood at 4.7, indicating a higher debt component.
Adani Transmission shares have soared approximately six times in the past one year on the BSE, outpacing the segment barometer BSE Power by a significant margin. The firm has a transmission network of 17,276 circuit kilometres, with presence in a dozen states.
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