Public sector National Aluminium Company (Nalco) has successfully paid back its foreign currency loan amounting to 20 billion yen together with interest to the International Bank of Japan, Tokyo. The value of payment works out to Rs 626.68 crore of principal and Rs 11.86 crore as interest.
The company had paid back all its dollar loans last year ahead of schedule. In fact, the cash-rich company had aimed to prepay the yen loan along with dollar borrowings last year.
But with the Japanese bankers unwilling to accept advance loan payment, fearing loss of income on interest, the company had to wait up to the scheduled date, that fell on Wednesday, to repay loan in one instalment.
As on date Nalco has no other outstanding loans either from domestic or international financial institutions. Even working capital needs of the company are being met entirely out of international resources. Similarly, the capital expenditure of about Rs 4,000 crore, being incurred on various expansion and diversion plans of the company, is being met out of internal resources.
The entire net fixed asset base of the company to the tune of Rs 2,800 crore and net working capital of Rs 850 crore as on today stand fully owned by the shareholders.
Nalco was set up in 1981 at a cost of Rs 2,408 crore of which Rs 1,118.64 crore was through a foreign currency loans, extended by a consortium of international banks.
Of the foreign currency loans, the Bank National De Paris (BNDP) provided $680 million and Chemical Asia Ltd sanctioned $300 million. Since the original loans had short-term maturity and heavy repayment schedule, the company later opted for refinance loan with longer repayment schedule.
Refinance loans of $695 million and 20 billion yen were raised in 1988 to liquidate the dollar loan availed from BNDP. A part of the loan was also used to meet working capital needs.
In order to partly hedge with the adverse impact of the rupee depreciation, Nalco took pre-active actions like forex derivatives, passing of export proceeds in foreign currency account and prepayment of loan to save cost. In line with this policy, the company had initiated steps for advance repayment of the refinance loan.
The refinance loan was due for repayment between 1991-92 and 2002-03. But the company, through pro-active repayment and prepayment policy, had terminated all the outstanding dollar loan by March 31, 1997, nearly five years ahead of schedule.
While prepayment along resulted in a net save of Rs 68 crore after accounting for opportunity cost of fund, the pre-active forex liability management by company during the last three and a half years had earned it around Rs 110 crore.
