NTPC has embarked on a massive capacity addition and diversification programme that requires a huge outlay. How is it going to meet the fund requirements? Says a confident A.K. Singhal, Director (Finance): The proposed capital outlay will be funded with a debt: equity ratio of 70:30, whereas at present, NTPC is lowly geared with a debt: equity ratio of about 0.52:1. The companys financing philosophy is to raise debt at the corporate level on the strength of its balance sheet for the projects undertaken by it. However, projects undertaken through joint ventures or subsidiaries are usually set up adopting project financing structures without recourse to NTPC. This strategy reduces the pressure on the balance sheet of NTPC and facilitates the raising of debt in larger volumes.
He adds, Recently, financial closure of the 1,500 MW thermal power project at Jhajjar undertaken through Aravali Power Company Pvt. Ltd., a joint venture with Haryana and Delhi governments, and the 1,500 MW Vallur Power Project undertaken through NTPC and TNEB joint venture, was achieved on project financing route.
Also, NTPC continuously looks for opportunities in the domestic and international debt market to raise debt. In the domestic market, long-term loans from banks and financial institutions are a major source of financing, Singhal says, adding that currently the company has unavailed lines of credit in excess of Rs.75 billion and is in discussions for finalising term-loan facilities of Rs.250 billion. So far as the international market is concerned, he says NTPC has a long and successful track record of raising foreign currency debt through syndicated loans, export credits, bonds, bilateral untied loans, and so on. The company also explores avenues for funding its projects through Overseas Development Assistance provided by multilateral/bilateral agencies.
The company has a strong balance sheet and growing operating cash flows and has been servicing all debt obligations on time without any default, enjoying highest credit ratings at home as well as abroad, Singhal says.
NTPC today has a shareholder base of above 10 lakh; it is the eighth largest shareholder base in the country. The Government of India holds 89.5 per cent of equity; foreign institutional investors, domestic institutional investors, banks and mutual funds account for about 6.68 per cent of equity; resident individuals, NRIs and HUF hold 2.57 per cent of equity; and the balance 1.25 per cent is held by bodies corporate, trusts, and so on.
How does the company maintain good relations with the investors? Our company believes in gaining and retaining lasting confidence of the investing community by building a relationship based on transparency, accountability, fairness and intensive communication. We have open communication channels with both institutional and retail investors, Singhal says.
Dinesh ChandraCOMMents
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