Chambal Fertilisers to raise Rs 6,673 cr

RBI data show, Indian firms raised Rs 2,114 crore in October through the ECB route

Chambal Fertilisers & Chemicals is set to raise $1 billion (Rs 6,673 crore) for its expansion plans and has appointed HDFC Bank and SBI Capital Markets as the lead managers to raise $500 million (Rs 3,336 crore) via the external commercial borrowing (ECB) route.

"We are looking at closing the deal in the next two-three months and it is clearly amongst the first signs of corporate investments picking up. So far, the investment has been mainly on the working capital side but now we are beginning to see the capex plan also pick up," said a person familiar with the development.

Chambal Fertilisers is planning to set up a fertiliser unit at Gadepan in Rajasthan to produce 1.27 million tonnes of urea it had announced earlier this year. At the board meeting held last month, the management had approved setting up of this new plan, which would require an investment of Rs 5,940 crore. The board also approved raising funds through borrowings of up to $75 million (Rs 500 crore) to part-finance the aforesaid project.

ECB is an instrument used by companies to facilitate access to foreign funds - bank loans, buyers' credit, suppliers' credit, securitised instruments, credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial institutions.

According to the latest Reserve Bank of India (RBI) data, Indian companies raised Rs 2,114 crore in October 2015 through the ECB route. This calendar year, companies raised a total of Rs 13,905 crore via ECB.

Recently, RBI had relaxed the ECB limit for small-value bonds, with a minimum average maturity of three years, to $50 million (Rs 334 crore) from the existing $20-million (Rs 133 crore). For ECBs above $50 million, the minimum maturity period should be five years, it said. The all-in cost for such ECBs has been reduced by 50 basis points from what was allowed earlier.

Once Indian companies start raising rupee resources from abroad, more such bonds will be issued and help make the domestic currency more international.