ICICI to raise Rs 2000 cr ($435 million) for telecom projects
Vivek Law in Mumbai
Financial institutions seems to be bullish finally on the telecom sector with ICICI alone close to raising Rs 2,000 crore from domestic banks and institutions (including itself) for two projects. In addition to this, ICICI has also extended a Rs 380 crore short-term debt to Hughes Ispat Ltd.
Highly placed ICICI sources said that while Rs 1,000 crore would be raised locally for Hughes Ispat over the next couple of months, a similar amount is set to sewn up for BPL Cellular (earlier BPL US West) shortly.
"The appetite for the sector is phenomenal and we are seeing a good demand from banks and institutions. The BPL Cellular raising is almost through and the Hughes Ispat tranche would be raised over the next couple of months," said an ICICI source.
"We have already sanctioned a short term debt of Rs 380 crore to Hughes Ispat till such time the Rs 1,000 crore domestic debt has been arranged for them," said the source.
Industrial Development Bank of India (IDBI) has agreed to extend a Rs 250 crore loan to Fascel, the Gujarat cellular licensee and will be arranging another Rs 600 crore from other banks and institutions.
"The migration package announced in the new telecom policy has changed the scenario. The projects look viable now. Moreover, telecom projects are no longer being looked by us as just being telephone providing company but instead there are tremendous earning opportunities available to them in the age of convergence. Once the infrastructure has been created, it can be used for multiple functions and not just telephony. These are the reasons for us being bullish on the sector," said the source.
Hughes Ispat sources said that with the short term debt now available and with ICICI committing more funds, the basic service provider is now in a "comfortable" position. It is expecting to get its financial closure completed by July. The total funds needed to achieve this is about $700 million of which the equity portion is expected to be about $330 million and the balance in the form of debt. The current equity base is $185 million and some more financial investors are expected to be roped in shortly.
Hughes Ispat has garnered 20,000 subscribers, but more importantly, it has been able to wean away a large number of corporates based in south-Mumbai and Worli.
Telecom operators have been squeezed for funds as first the Pokharan blasts and then the lack of clarity on the telecom policy, led to institutions staying away from funding the telecom sector. Most operators do not in fact have any debt on their books and save for some vendor financing, have been forced to survive by bringing in equity.
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