Why Adani wants ₹14,000 cr loan from SBI

One of the largest project credit proposals in recent months, the loan is even larger than the ₹12,770-crore loan Adani Enterprises arm Navi Mumbai International Airport secured in March. The Gautam Adani-led conglomerate also recently raised ₹6,071 crore for a greenfield copper refinery project at Mundra.

The contours of the 15-year loan are being finalized, but the idea is that SBI will underwrite the entire loan and sell some of it to other lenders, like in the case of Navi Mumbai Airport, where other lenders took over most of the loan from SBI. The people cited above said SBI will retain about ₹5,000 crore of the PVC project loan on its books. The total initial investment in the project is estimated at ₹19,000 crore, with a mix of debt and equity.

“The bank is likely to peg the loan to its six-month marginal cost of funds-based lending rate (MCLR)," one of the two people cited above said, adding that the spread over the six-month MCLR—currently at 7.45%—is yet to be decided and would depend on the external rating of the project.

The second person said that other banks will also evaluate the loan proposal and would like to take over some of the exposure, depending on their appetite for corporate loans. That said, if lenders’ interest in the Navi Mumbai airport project is anything to go by, SBI is likely to find ample takers for the ₹9,000 crore it plans to sell. Mint had reported in April that SBI’s nod to lend ₹12,770 crore to the Navi Mumbai International Airport generated a lot of interest among rival banks, with a group of five lenders willing to jointly take over a majority of the loan.

Emails sent to spokespeople of SBI and Adani Enterprises remained unanswered.

The Adani Enterprises project, which will have a capacity of 2,000 KTPA (kilo tons per annum), will make PVC grades such as suspension PVC, chlorinated PVC and emulsion PVC, according to information on the government’s environment clearance portal. The main raw materials for the project are salt, limestone, coal/coke and potassium chloride.

In its annual report for 2021-22, Adani Enterprises said it has ventured into the petrochemical business in 2021 and is exploring opportunities to develop a petrochemical cluster at Mundra. The first proposed project of 2 million metric tonnes (MMT) coal-to-PVC capacity is likely to be built in a phased manner. The firm said the first phase will cover the development of 1,000 KTPA PVC and is expected to be commissioned by November 2024.

On 29 June, Care Ratings reaffirmed the ratings assigned to Adani Enterprises’ bank facilities and debentures of ₹16,500 crore and ₹840 crore, respectively. The agency said it continues to take into consideration the strengthened financial flexibility of the Adani Group, led by the established track record of successful incubation of businesses across verticals.

Such large loans would allow lenders to expand their corporate portfolios once again after years of lull when companies had embarked on a deleveraging journey.

For the last couple of quarters, bankers have been talking about a revival in credit demand among corporate borrowers and believe significant growth is in the offing.

Data from the Reserve Bank of India (RBI) showed that loans to industries—micro, small, medium and large—stood at ₹31.6 trillion as of 20 May, up 8.7% from the same period last year.

In its Financial Stability Report released last month, RBI said that while corporate sales and profitability have risen, a durable commencement of the capex cycle remains elusive.

Most of the revival in credit demand, RBI said, was in the second half of the last fiscal, and the momentum has continued this year.