Two of the biggest loan proposals recently have drawn very different reactions from banks. Bharat Petroleum Corporation Ltd (BPCL) wants to borrow ₹32,000 crore, and Vodafone Idea seeks ₹23,000 crore. Together, these loans are about 2% of the total loans to large industries.
Three bankers involved in talks with both companies said they are keen to lend to BPCL because of its strong finances and government backing. BPCL has hired SBI Capital Markets (SBI Caps) to help with the 15-year loan. The money will be used for upgrades at its Bina Refinery, with a minimum loan of ₹1,600 crore from each bank.
The loan is expected to be linked to the State Bank of India’s three-month lending rate, which is currently 8.3%. One banker mentioned that these loans usually have a small margin added to the benchmark rate. Another banker said all major banks are interested in lending to BPCL.
In May 2023, BPCL announced a ₹49,000 crore plan to expand in petrochemicals and renewable energy. This includes an ethylene cracker project and increasing the capacity of the Bina Refinery.
Vodafone Idea’s Plan Raises Concerns
On the other hand, bankers are wary of lending to Vodafone Idea. One concern is that Vodafone Idea is still upgrading its 4G networks while competitors are moving to 5G. Vodafone Idea plans to raise the loan in three months, but one banker thinks it might take at least six months. SBI will conduct a study to assess the project’s viability before banks make a decision.
Vodafone Idea’s senior executives, including CEO Akshaya Moondra, recently presented their capex plans to bankers. The company aims to raise ₹23,000 crore in loans and ₹10,000 crore in guarantees.
One banker mentioned a previous meeting with Vodafone Idea in August 2023, where they were hesitant to give loans. Despite recent fundraising by the telco, bankers remain cautious but open to discussions.
On May 16, Vodafone Idea announced plans to use recent equity and planned debt funding for a ₹50,000-55,000 crore capex over three years. The funds will expand 4G coverage, increase 4G capacity, and roll out 5G.
Boosting Corporate Credit
Banks are trying to increase corporate credit, which has lagged behind other types of loans. This is partly due to a lack of new large projects and companies preferring to use internal funds instead of taking on more debt.
The Reserve Bank of India (RBI) is encouraging companies to boost capex, following the government’s push for this. Experts believe private capex will help corporate credit growth in FY25.
Ajit Velonie, senior director at Crisil Ratings, noted that steel, cement, and pharmaceuticals are leading the capex recovery. Emerging sectors like electronics, electric vehicles (EVs), and solar modules are also expected to contribute, especially in the medium term.
Emails sent to Vodafone Idea, BPCL, SBI Caps, and SBI for comments were not answered.
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