The Telegraph
Since 1st March, 1999
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Gail bond issue to pay off ADB borrowings

New Delhi, Nov. 5: Gail (India) Ltd plans to come out with a Rs 500 crore bond issue next month as it has decided to pre-pay an expensive Rs 450 crore Asian Development Bank (ADB) loan. The bond issue is envisaged as a debt swapping exercise.

Gail director (finance) J. K. Jain told The Telegraph that since interest rates have softened and the long-term ADB loan has to be repaid in dollars, the company has decided to pre-pay it.

Gail has exported polymers worth Rs 147 crore in 2002-03, but the total foreign exchange outgo for the company during the year has been Rs 672 crore. The retiring of this debt will help curtail the foreign exchange outgo in the long term.

Jain disclosed that Gail had already gone in for a debt swap by replacing two loans from ADB and the Japanese international bank together totalling Rs 850 crore with credit from indigenous banks.

The switching over to cheaper loans from domestic banks has enabled Gail to lower its debt cost and this has helped improve the company's bottomline.

The debt-equity ratio of the gas major is currently around 0.2:1 as a result of which it enjoys a high credit rating. Gail intends to leverage this strength with the banks to raise loans and low rates of interest for major projects such as the national gas grid and its diversification into petrochemicals.

Senior Gail officials say the company is still in the race to pick up a stake in Haldia Petrochemicals Ltd. The banks and financial institutions, which are working out a proposal for restructuring the Calcutta-based company, have not got back to Gail on the issue as yet. However, our offer still stands,'' a senior official said.

Gail chairman cum managing director Proshanto Banerjee has a vision of converting the gas major into a multiple business company.

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