However, Bharat Shell officials now say the company is not interested in drawing the loan and would rather go in for an equity issue to raise capital. The company has a paid-up capital of Rs 100 crore.
The IDBI had agreed in principle to grant Bharat Shell a rupee term loan not exceeding Rs 45 crore carrying interest at minimum lending rate plus 3.5 per cent (excluding interest tax) for setting up the plant with an installed capacity of 55,000 tonnes per annum.
According to Industrial Development Bank of India, the loan is subject to the normal terms and conditions applicable to the grant of such assistance by it and the special conditions stipulated for the project.
The executive committee of IDBI which considered the proposal observed that the company had incurred losses during the initial two years of its formation. "Looking to this and the risk perception of the project, corporate guarantees of Shell and BPCL have been stipulated as additional security."
Bharat Shell is a joint venture between Bharat Petroleum Corporation Ltd (BPCL) and Shell Overseas Investment BV. The company was set up in September 1993 and started marketing lubricants blended at BPCL's plant in February 1994.
The Taloja plant, being set up with a capital cost of Rs 75-80 crore, is expected to become operational by year-end.
Besides lubricants, the company is also involved in the parallel marketing of liquified petroleum gas (LPG), supplying LPG to bulk consumers as well as households on the outskirts of Mumbai.