ITC closes 85 mn ECB

CALCUTTA, OCT 19: Tobacco major -- ITC Ltd has completed its 85 million external commercial borrowing ECB programme last Friday, at 78 ...

CALCUTTA, OCT 19: Tobacco major 8212; ITC Ltd has completed its 85 million external commercial borrowing ECB programme last Friday, at 78 basis points above Libor. With this, the company8217;s total ECB in the last two months amounts to 103 million about Rs 370 crore.

According to sources in the banking industry, the unsecured loan is repayable in three equal instalments in the seventh, eight and ninth year. The earlier tranche of 18 million was raised jointly by Citibank and Sumitomo Bank.

ITC has an ambitious capital expenditure plan of Rs 1,800 crore over the next five years, mainly in its tobacco and hotel businesses. Of this, Rs 850 crore is planned to be invested in its core tobacco business. It has already invested Rs 300 crore in modernising its plants at Saharanpur, Munger and Bangalore city.

Initially, the mandate for raising the loan was with Natwest Markets and DKB of Singapore. Later, State Bank of India joined as joint lead arrangers to the debt issue. It is reliably learnt that SBI has subscribed around 15 million to the issue.

Banking sources said the issue did not have a smooth sailing and a lot of hard bargaining went into fine-tuning the price.

Eventually, most of the company8217;s consortium bankers decided to participate in the issue with the exception of Standard Chartered, sources said.

Although the issue had been fully subscribed last Friday, the lead arrangers have decided to keep it open for another day on Monday to accommodate some Indian banks who are interested in joining the syndicate, the sources said.

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A Standard Chartered Bank source confirmed that it had not participated because it felt that the quot;rates offered by the company were too fine and below the comfort level of 90 basis points above Libor.quot; Besides, he added, the end-use of the funds being raised was not specified in the company8217;s offer document.

Indian companies are facing increasing difficulties in marketing debt issues abroad in view of the declining interest in Indian debt paper.

On March 31, 1997, ITC8217;s debt-equity ratio was 0.53:1. Even after taking into account the current loan of about Rs 370 crore, the company8217;s debt-equity ratio would be less than one.

In 1996-97, the company managed to keep its borrowings under control. It retired Rs 240 crore of existing long-term debt and mobilised Rs 308 crore of fresh long-term debt. As on March 31, 1997, secured loans went up from Rs 482 crore to Rs 634 crore, while unsecured loans fell from Rs 282.55 crore to Rs 91.11 crore.

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Currently, the bulk of the company8217;s loan portfolio including demand and short-term working capital loans comprises cash/ export credit of Rs 265.89 crore and term loans from banks of Rs 210.29 crore.