The Telegraph
Since 1st March, 1999
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Debt swap to help Gail save Rs 40 crore

New Delhi, April 4: Gail (India) Ltd has decided to go in for a Rs 500-crore debt swap during the current fiscal which is expected to save the company Rs 40 crore.

A senior Gail official told The Telegraph that the loans taken from the Asian Development Bank (ADB) and a Japanese bank will be pre-paid soon and replaced with a cheaper loan. He said the new loan would be at a rate which is about 2 per cent lower than that it currently pays on the earlier loans.

These loans were raised for the second phase of Gail’s Hazira-Bijaipur gas pipeline.

The debt-equity ratio of the company has come down to 0.32 during the current fiscal from 0.45 in the previous year. The debt restructuring plan being undertaken during the current fiscal aims to bring down this ratio still further.

The Gail official said, “The objective of the corporate strategy at this point is not only to reap the immediate benefits of a reduced debt burden but also help to raise future loans at lower rates of interest.”

The debt-equity ratio of a company constitutes a key parameter for banks in determining the terms of future loans. Gail has chalked out an ambitious Rs 20,000-crore investment plan for setting up a national gas grid and the lower debt-equity ratio will help to raise loans at cheaper rates of interest for this project as well.

The five-year project envisages a green quadrilateral pipeline network scheme. This would include Kakinada-Calcutta, Kakinada-Uran, Kakinada-Chennai, West Bengal-Jagdishpur and Kochi-Mangalore-Banglaore sections. A route survey has already been carried out for all the sectors.

Gail chairman Proshanto Banerjee said that on the merger and acquisition front, the company has submitted its expression of interest to acquire a stake in Dabhol Power Corporation and due diligence processes are on to assess the acquisition opportunities in Engineers India Ltd, Haldia Petrochemicals and Greater Calcutta Gas Supply Company Ltd (GSCL).

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