Mumbai: Larsen and Toubro Ltd (L&T), India’s largest engineering company, said its units plan to borrow at least Rs10,000 crore this year to fund road building and power projects.
“We will have to raise this money through special purpose vehicles and it will all be within the Indian financial system without any recourse to L&T,” chief financial officer Yeshwant M. Deosthalee said in an interview.
Larsen will use half the money for five road projects and the rest to finance a 1,600MW thermal power plant project in Rajpura, Punjab, he said. Infrastructure Development Projects Ltd, a Larsen unit, will own a special company set up to build roads, he said.
Indian utilities are planning to almost double generation capacity in the next seven years as the world’s second fastest growing major economy expands its public infrastructure. Prime Minister Manmohan Singh has pledged to build power plants to cut peak-hour shortages and the ministry of road transport and highways has said it aims to build 20km of roads a day.
Three Larsen units, L&T Ahmedabad Maliya Tollways Ltd, L&T Rajkot Vadinar Tollway Ltd and CSJ Infrastructure Ltd, have a combined Rs3,000 crore in project finance loans outstanding, according to data compiled by Bloomberg. The company has Rs11,500 crore in total debt, the data show.
Larsen’s senior unsecured debt has an AAA investment-grade grading from Credit Rating Information Services of India Ltd. The company last sold bonds in October when it raised $200 million from 3.5% convertible notes due 2014, and it sold a combined Rs3,705 crore of local-currency notes in 2008 and 2009, the data show.
Moody’s Investors Service withdrew its speculative-grade Baa2 rating for Larsen on 23 February. The New York-based risk assessor in August lowered the outlook on the rating to negative from stable, citing a greater-than-expected increase in consolidated debt to finance rapid growth plans.
Larsen won the bid for the Rajpura power project this year and is working on the project’s funding, Deosthalee said, without being more specific. Money raised for road-building will go to the company’s three projects in Gujarat, one in Maharashtra and one in Chennai, Tamil Nadu, he said.
Larsen, which has declined 3.2% this year, gained 0.8% to Rs1,501.15 in Mumbai on Wednesday. The stock slumped in January after the company reported its first quarterly sales decline in seven years.
Arijit Ghosh in Mumbai and Shelley Smith in Hong Kong contributed to this story.