Bloomberg News

GAIL India to Borrow $300 Million Abroad, Seeking Cheaper Funds

September 12, 2011

Sept. 12 (Bloomberg) -- GAIL India Ltd., the nation’s biggest gas distributor, plans to borrow $300 million overseas next month to take advantage of lower interest rates outside the country for funding pipeline projects.

The company has tied up 12.5 billion rupees ($267 million) in a rupee-denominated loan from HDFC Bank Ltd. at 10.03 percent and is delaying drawing the money as it seeks cheaper funds overseas, P.K. Jain, director of finance, said by telephone from New Delhi. The utility may sell bonds overseas in November, although it is yet to decide the size, he said.

“It is still much cheaper to borrow overseas and we’re looking at all options outside India,” Jain said. “We may have to take domestic debt as well, but we’re trying to see where we can get the best interest rates.”

GAIL plans to borrow about 46 percent of the 82.7 billion rupees it proposes to spend in the year ending March to build natural gas pipelines and expand capacity of chemical plants in Asia’s second fastest-growing major economy. Higher inflation may force India’s central bank to raise interest rates by a quarter-percentage point to 8.25 percent on Sept. 16, a Bloomberg News survey of 10 economists showed, adding to 11 increases since March last year.

GAIL has about 25 billion rupees of outstanding debt currently, Jain said. The utility borrowed $150 million from Bank of Tokyo-Mitsubishi UFJ Ltd. this year and will draw on a $78 million loan from the U.S. Export-Import Bank to buy compressors for gas pipelines, Jain said.

The company is seeking loans from export-import banks in Japan and Germany to pay for equipment purchases for the expansion of a chemical plant in the northern Indian state of Uttar Pradesh, Jain said. Exim Bank loans have interest rates of about 1.5 percent, he said.

--Editors: John Chacko, Mike Anderson

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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