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Jindal Steel eyes 15,000 cr in one of the largest corporate loan deals

The loan will help JSPL arm Jindal Steel Odisha partly fund the  ₹22,500 cr capacity expansion at Angul in Odisha  (bloomberg)Premium
The loan will help JSPL arm Jindal Steel Odisha partly fund the 22,500 cr capacity expansion at Angul in Odisha  (bloomberg)

  • After the muted corporate loan demand over two years, lenders are now lapping up most opportunities in the segment
  • The loan will help it partly finance the 22,500 crore capacity expansion at Angul in Odisha, with parent JSPL bringing in the rest as equity

MUMBAI : Jindal Steel and Power Ltd (JSPL) is raising 15,000 crore from a clutch of banks led by State Bank of India (SBI), three people aware of the development said, in one of the largest corporate loan agreements in recent times.

Jindal Steel Odisha Ltd, a wholly owned unit of Naveen Jindal-promoted JSPL, is raising the long-term loan, the people said on condition of anonymity. The loan will help it partly finance the 22,500 crore capacity expansion at Angul in Odisha, with parent JSPL bringing in the rest as equity. JSPL will also provide a corporate guarantee for the loan.

JSPL is one of India’s largest steelmakers, with interests in steel, power, mining and infrastructure.

“SBI, the lead lender, has already underwritten the entire loan and is now in the process of down selling it to other lenders," one of the three people cited above said, adding that India’s largest lender plans to retain 5,000 crore on its books. He said several banks, including some of the largest public-sector lenders, have evinced interest and are reviewing the loan proposal.

The JSPL loan would be even bigger than a recent loan to the Adani Group. Mint reported in April that SBI’s nod to lend 12,770 crore to Adani Enterprises’ arm Navi Mumbai International Airport Pvt. Ltd has generated a lot of interest among rival banks, with a group of five lenders willing to jointly take over a majority of the loan.

“This (Odisha) expansion programme will be funded by a judicious mix of internal accruals and long-term borrowings. The debt facility agreement has already been signed with State Bank of India for securing financing for the project," a JSPL spokesperson confirmed in an email.

An email sent to SBI remained unanswered till press time.

The second person cited above said lending to projects where the parent acts as a corporate guarantor gives the bank some additional comfort and makes it seem a less risky bet. That apart, lenders also rely on SBI’s project finance assessment capabilities and are known to be eager to take part in loan consortia underwritten by the state-owned bank.

“Several large companies are setting up subsidiaries for new projects or even for expansion of existing ones. This is helping them save on taxes under the new regulations, and banks are also happy to lend since there is a corporate guarantee from the parent," the person said. Jindal Steel Odisha was set up in April 2021.

The proposed loan has been rated A+ by CareEdge Ratings, which believes the project has high strategic importance and economic incentive for JSPL, with consolidated liquid steel capacity getting expanded from 9.6 million tonnes per annum (mtpa) to 15.6 mtpa by FY25.

After the muted corporate loan demand of the past couple of years, Indian lenders are now lapping up most opportunities in the segment. Led by growth in loans to infrastructure projects, banks are witnessing a steady uptick in corporate loans and hope to maintain the momentum in the current financial year.

Bank loans to corporates revived in FY22, as lenders are eager to once again fund infrastructure projects and cater to rising working capital needs. This surge in demand and willingness of banks to fund infrastructure took corporate credit growth to an eight-year high in 2021-22.

Meanwhile, JSPL reported a weak set of numbers in the March quarter, with standalone net profit plunging 65% to 1,198 crore.

Analysts at brokerage firm Prabhudas Lilladher attributed the sluggish performance to higher costs in steel operations and slow pick-up in operational performance of overseas coal mining subsidiaries despite high coal prices.

“Global steel markets were spooked due to the Russia-Ukraine war, depressed market conditions in China and record-high inflation. Imposition of export duty by India would further destabilize already weak demand in anticipation of lower supplies from Indian mills," Prabhudas Lilladher said in a report on 1 June.

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