Fis To Revise Norms For Telecom Project Loans
Financial institutions are planning to fund only those telecom projects in which the core promoters hold a stake of 51 per cent.Currently, institutions fund projects in which the core promoters hold 26 per cent.
The proposal was discussed at a recent meeting of senior executives of institutions.
Highly placed FI sources said enhanced equity contribution by core promoters is part of a package of measures being evolved as for telecom financing.
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The other options being considered include a revised debt equity ratio of 1.5:1 compared with the present 1:1, capping exposure to a specific project at 40 per cent and pledging 51 per cent of the equity for financing. FI sources stated that a decision is yet to be taken on any of these issues.
The proposal to raise the equity contribution of core promoters to 51 per cent from 26 per cent will have an impact on those companies which have a consortium of promoters. .
"In some companies like Reliance Telecom, Birla-AT&T and Hughes Ispat, the core promoters can be easily identified on the strength of their shareholding.These projects will have no problems in getting funds. It will be difficult to identify the core promoters in companies like JT-Mobile and Telelink which have a number of shareholders with smaller holdings. These companies will find it difficult to access institutional funds," say analysts.Besides, if one of the promoters exits from a project questions could arise as to whether he was a core promoter or not.
Presently for determining the eligibility for institutional funding, the first year's licence fee and cash losses of two to three years is factored into the total project cost. FIs are proposing that the total exposure to a project be restricted to 40 per cent of the cost. The total cost of the project will include the licence fee and cash losses during the rollout period.
Rollout period is the time frame within which telecom operators implement the total project including setting up the network. Analysts opine that the proposed cap of 40 per cent will benefit projects which have a longer rollout period as more money will have to be pumped into the project over a longer period. The new norms will help them access larger finance.