In less than five months since starting operations, the Sagarmala Finance Corporation Ltd (SMFCL) has sanctioned Rs 10,881.51 crore worth of loans to the Kerala Infrastructure Investment Fund Board, Ramayapatnam Port Development Corporation Ltd, Machilipatnam Port Development Corporation Ltd and Bhavanapadu Port Development Corporation Ltd, its managing director LV S Sudhakar Babu has said.

The loans are guaranteed by the Kerala and Andhra Pradesh governments, respectively.

The Non-Banking Financial Company (NBFC) dedicated to the maritime sector has sought additional equity infusion from the government to help lend more, Sudhakar Babu told ET Infra.

Sagarmala Finance Corporation has sanctioned Rs 2,975.71 crore for a tenure of 15 years to Kerala Infrastructure Investment Fund Board for funding coastal road network in the state. Of the sanctioned amount, Rs 1,000 crore have been disbursed.

For Machilipatnam Port Development Corporation Ltd, SMFCL has sanctioned Rs 2,100 crore as term loan for 17 years and nine months, while for Bhavanapadu Port Development Corporation Ltd, it has agreed to lend Rs 1,607.70 crore for 17 years and eight months. In both these cases, no disbursement has been done so far.

For Ramayapatnam Port Development Corporation Ltd, SMFCL has disbursed Rs 2,460.07 crore out of the total sanctioned amount of Rs 3,938.10 crore for 16 years and three months.

The money lent to Ramayapatnam Port Development Corporation will be used to refinance the loan of Rs 3,938.10 crore taken from Power Finance Corporation Ltd (PFC) to construct Ramayapatnam Port, Sudhakar Babu said.

The NBFC is looking to tap the bond market to tide over the asset-liability mismatch (ALM), he revealed.

"So far, we have been depending on domestic term loans to finance operations. These are 3-3.5 years term loans which has led to an asset-liability mismatch (ALM) because our asset side lending is beyond 10-15 years. We have to match that gap and for that the option is ten-year bonds. But since the bond yields are very tight now, we want to wait for the right time till the yield settles down ahead of launching the bond issue, Sudhakar Babu noted.

With its gearing ratio having touched more than eight so far, SMFCL cannot lend more until it is given additional equity.

A gearing ratio is a financial metric that measures the proportion of a company's capital that is funded by debt compared to equity, indicating its long-term solvency and financial risk. It shows how much of a company's operations are financed by borrowing.

"We are trying to infuse additional equity and have requested the Ministry of Ports, Shipping and Waterways which, in turn, has requested the Ministry of Finance. It takes time," Sudhakar Babu said.

"We have a strong loan pipeline of  Rs 10,881.51 crore. We are yet to disburse Rs 7,271.44 crore with existing sanctions which itself takes us to more than 8-9 times of our gearing ratio which is very high. If additional equity is not given, we are planning to go for a perpetual bond issue that will come in as Tier 1 capital and reduce our gearing ratio," he said.

The perpetual bond issue cannot go beyond 50 per cent of the existing net worth of SMFCL of around Rs 1,100 crore.

"So, we are planning to do a perpetual bond issue of about Rs 550 crore. If additional equity is not given, then at least our gearing ratio will come down. For every Rs 1,000 crore of equity the government gives us, immediately in the same financial year, we can give a term loan of Rs 10,000 crore with government guarantees. So, my assets under management (AUM) will increase," Sudhakar Babu explained.

Ramayapatnam Port Development Corporation Ltd (RPDCL), a Special Purpose Vehicle of the Andhra Pradesh Maritime Board (APMB) which is implementing the Ramayapatnam Port project, has availed a term loan of Rs 3,938.10 crore from Power Finance Corporation Ltd, out of which Rs 2,267.19 crore have been availed so far.

The PFC loan is priced at 10.40 per cent per annum (pre-commercial operations date) and 9.65 per cent per annum (post-COD).

"Given the long gestation period and capital-intensive nature of port infrastructure projects, the cost of borrowing has a significant bearing on the financial sustainability and tariff competitiveness of the project. In order to optimise the cost of funds and improve the long-term financial viability of port projects, discussions were held between APMB, RPDCL and Sagarmala Finance Corporation Ltd. SMFCL has offered to refinance the existing PFC loan at a substantially lower interest rate of 8.60 per cent per annum with a longer repayment tenure and a financing structure aligned to the port sector with less cumbersome security creation requirements," according to a February 16 order issued by the Infrastructure and Investments (Ports) Department, Government of Andhra Pradesh.

The order also said that the Andhra Pradesh government has given a guarantee to SMFCL for loan repayment and a comfort letter to address potential revenue shortfall during the initial years of operations of the port.

Source: ET Infra. Com 

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