Mumbai, July 8: BSES, the Mumbai-based power company, is planning to hike its borrowing limit to Rs 3,000 crore from the present Rs 2,000 crore. Options under evaluation, to raise the debt amount, include issue of infrastructure bonds in the domestic market and yankee bonds.

This is despite the fact that of the maximum limit of Rs 2,000 crore available to the company, it has so far used only half of it. The cash will be utilised for its ongoing projects in power generation, transmission and distribution.

BSES is setting up a 500-mw naphtha-based power project at Palghar in Maharashtra for which it posseses an in-principle clearance from state and central authorities. The project is yet to obtain environmental clearances but with the recent easing of regulations dispensing with central government clearance for projects up to 500 mw, the company will have to seek such okays only at the state level. BSES will seek shareholders' approval to increase the debt limit at the annunal general meeting scheduled to be held in August last week.

BSES chairman and managing director RV Shahi said the company will require the funds for its immediate and long-term expansion plans. Though power bonds and yankee bonds are among the various instruments under consideration, nothing has been finalised yet, he added.

BSES has a debt-equity ratio of 0.6:1 which gives it leeway to increase debt rather than raise equity, an industry source said. Though, even a 4:1 debt-equity ratio is permissible for the capital-intensive power business, a ratio of 2:1 is considered ideal. Infrastructure bonds have an added advantage of attracting investments of capital gains. Such bonds are now approved instruments for the purpose of capital gains tax exumption under section 54EA and 54EB of the Income Tax Act, 1961.

For meeting its long-term funding plans, BSES is evaluating overseas debt options. The company raised $125 million through a GDR issue in early 1996 and subsequently $14.5 million through an ECB issue. The company has, in recent times, bid for several projects in various states. It is also in the process of re-negotiating the distribution contract with the Orissa state electricity board.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.