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Business News/ Money / Apollo gets IFC loan on easy terms
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Apollo gets IFC loan on easy terms

Apollo gets IFC loan on easy terms

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Kolkata: Apollo Hospitals Enterprise Ltd has secured from the International Finance Corporation (IFC), a World Bank arm, a unique 10-year loan of $50 million (around Rs233.4 crore), on which the company will not have to pay interest for the first two years, and repayment of principal starts only after five years. The company will pay 3.5% on the loan, and if the cost of hedging foreign exchange risks is added, the loan could cost up to 7.5%, according to Prathap C. Reddy, Apollo’s chairman.

“The terms of the loan are unique and a first in the health care sector," he said.

The money will be spent on expanding Apollo’s hospitals and building at least 20 new ones. The company, according to Reddy, is looking to spend up to Rs1,800 crore over the next two years to expand capacity, and half of that amount would be borrowed.

The health care industry needs long-term funds, and banks in India aren’t willing to lend for more than seven-eight years, Reddy said.

Yes Bank Ltd has recently arranged funds for a couple of large healthcare projects on similar terms, according to Somak Ghosh, the bank’s group president for corporate finance and development banking.

“Though such loans aren’t very common, they aren’t entirely unheard of," he added.

In India, companies have been raising money through so called bullet loans under which the borrower doesn’t have to pay anything till the end of the tenure, but the term usually doesn’t extend beyond three years, said Aditya V. Lodha, managing partner of Lodha and Co., a leading arranger of project finance.

“Securing a 10-year loan on such friendly terms isn’t easy, and it shows international lenders recognize Apollo’s fundamental strengths," he said.

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Published: 16 Dec 2009, 08:32 PM IST
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