Essel Infra shifts to low-cost NBFCs, bonds for funding needs

In an effort to reduce its cost of borrowing, engineering firm Essel Infraprojects has prepaid bank loans of Rs 1,200 crore by raising funds from alternative sources like money markets and non-bank lenders, sources said today.
The Subhash Chandra-promoted firm had raised the bank loans from consortiums led by Standard Chartered Bank and Punjab National Bank, which have been prepaid by arranging funds at a lower cost, the sources said.
The move to the bond market and NBFCs will help the company save up to 3.50 per cent in interest costs, they said.
It raised Rs 600 crore by issuing long term non-convertible debentures with a coupon rate of 9.05 per cent, they added.

When contacted, the company declined to comment on the matter.
It can be noted that due to slower transmission of RBI's rate cuts into bank lending rates, firms have been shifting their borrowings to alternatives like money markets.
Currently, exposure of Indian commercial banks to infrastructure sector is around Rs 8.72 trillion, almost 15 per cent of outstanding loans of the banking sector.
Essel Infraprojects has a portfolio of around 4,600 km of roads in states like Madhya Pradesh, Gujarat, Punjab, Haryana, Uttar Pradesh, Maharashtra and Tamil Nadu.