Indian Aluminium Co Ltd has tied up a euro dollar loan worth $18 million (nearly Rs 63 crore) to fund its project-related rupee expenditure and capital expenditure projects at its various plants.

The syndicated external commercial borrowing (ECB) has been arranged through Citibank and has a structure with an average tenor of four years and a door-to-door-tenor of five years.

The consortium of banks includes Sakura Bank in Hong Kong, Banque Nationale de Paris Intercontinentale, The Fuji Bank in Singapore, Banca Monte dei Paschi di Siena in London, The Longterm Credit Bank of Japan in Singapore and the SBI-European Bank.

Sources said Indal will use $15 million as project-related rupee expenditure under the scheme for exporters, and $3 million to finance capital expenditure.

According to the recent liberalised norms, exporters are permitted ECBs up to twice the average amount of annual exports during the previous three years subject to a maximum of $100 million without end-use restrictions. The minimum average maturity for three years to raise $15 million will be to the advantage of Indal.

In 1994-95, the aluminium major had raised $11 million to expand and upgrade its sheet and foil plants. For this, the company had bought an interest rate cover.

For the latest loan, however, Indal has not taken an interest cover as it was secured on a fixed rate agreement (FRA).

Foreign debt formed a major part -- almost 68 per cent -- of the unsecured loans for the last fiscal, which have more than doubled over the previous year to Rs 128.4 crore.

Sources said because of strong fundamentals and a high credit rating, Indal was in a position to tap borrowings from overseas funding agencies. The company was able to hold its debt to 38 per cent of the capital employed.Leveraging on its high exports, Indal accessed substantial foreign currency funds and contained average borrowing cost to just over 14 per cent.

Moreover, with growing exports, Indal has a natural hedge, said an official.

Sources said although 1996-97 was a difficult year for Indal, total exports by its core business increased by 15 per cent. Export of semi-fabricated products increased by 10 per cent and alumina exports were up by 20 per cent.This was notwithstanding a disquieting trend with import duties on aluminium foils, sheets and extrusions moving further southwards to 20 per cent from the already lowered 25 per cent.

The Indian associate of the Canadian major Alcan has also kept its options open for raising more loans through this route in the current year. The loans would be raised for the continuous caster project for supply of good quality cast coils to the Belur sheet plant, which is likely to be completed by the end of the current year.

With the aim of reducing the interest burden, Indal is also funding its working capital from FCNR(B) borrowings and commercial paper. Indal has mopped up Rs 35 crore through commercial paper in the current fiscal. Commercial paper rates are hovering at around 12 per cent.

The aluminium major has used the foreign debt to complete its aluminium scrap recycling project at Taloja in Maharashtra. This unit has a capacity of 25,000 tonne per annum.

The installation of a twin-head poly-extruder at Kalwa has helped the company produce high quality laminated foil and webstock. With enhanced conversion facilities, the value-added laminated foil would surpass the production of plain foil at Kalwa.

The debt was also used for installation of an electronic engraver helping the company to position itself as one of the most modern converting units in the Indian Ocean Rim region.

The capital expenditure exercise also took into account infotech package being installed by Oracle. This included a canned software package which would help link databases at Indal's 10 offices and 13 plants. In short, it would improve Indal's supply chain and financial management.

The capital expenditure during the last fiscal was Rs 126 crore, almost 19 per cent more than the previous year. Sources said projects worth more than Rs 61 crore were completed and commissioned.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.