PROJECT FINANCE FOR

STEEL PROJECTS

Complete Solutions Provider in Investment Banking

FINANCING OPTIONS
Corporate Finance Project Finance

Full Recourse Limited Non Recourse

Recourse
Recourse only
To Sponsors to Project Cash
only under Flows
To Sponsors &
pre-determined
circumstances Project Assets

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 TYPICAL STRUCTURE

SPONSORS EPC
Arrangement

RAW MATERIALS
LENDERS SPV Coal/ Coke
Iron Ore

Product Offtake/
Marketing

PROJECT FINANCE: CHARACTERISTICS

Project set up through an SPV
Borrower has no historical financial strength nor
any assets
Project stands financially independent
lenders have limited/no recourse to existing
operations and cash flows of the promoters
Large capital costs with high D/E ratio
Typically 1.5:1 can go upto 2:1
Debt funds required for long duration
Banks are comfortable with door to door maturity
of 10 years
Long gestation periods
Highly structured and complex
documentation
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PROJECT FINANCE : RISK
Promoter/ Sponsor Risk
Completion Risk
Raw Material/ Power Availability Risk
Market Risk
Infrastructure / Logistics Risk
Environmental Risks
Technology Risk
Financing Risk
Operation & Maintenance Risk
Interest rate risk
Foreign exchange risk
Force Majeure
Legal Risk
Political Risk

Usual Source of Finance

Rupee Term Loans
Export Credit Agency (ECA)
External Commercial Borrowings (ECB)

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Bank Finance: Asset Liability Mismatch
Banks usually carry short term liabilities. The Project finance
loans are long term in nature, usually 10 years.
The present financing structure is usually 60% debt and 40%
equity, the debt coming from FIs and Banks.
To address Asset Liability Mismatch related issues, the
worldwide practice is to have bond financing either at initial
stage or more often project finance being taken out by bond
financing after commercial operation.
Advantages of bond financing:
- rating required, better disclosure.
- closer monitoring, better discipline in reserves
maintenance.
- better discipline required by project company because
cost overrun, delays etc would lead to problems.
- Exit option available to the Banks/FIs.

Bank Finance: Other Major Issues

Banks have an expertise and appetite for appraising
and taking on credit risk.
The market risk associated with cyclicality of the
commodities market would need to be addressed.
Project Completion risk and cost overruns need to
be addressed either by a proper contractual
structure or promoter undertakings
Taxes & duties
withholding taxes, stamp duty in various states & structure of
equitable & legal mortgage
Approvals and permissions from various authorities
Land Acquisition issues

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 CREDIT ENHANCEMENT MEASURES

Escrow Accounts

Trust & Retention Accounts

Debt Service Reserve Accounts

Financial Covenants

Pledge of Shares of Promoters

Assignment of Contracts & Receivables

Mortgage / Hypothecation of Assets

SBICAP: India’s Premier

Investment Bank
Was incorporated in 1986 as a wholly owned subsidiary of the State Bank of India, country’s largest
domestic investment bank. In January 1997, fresh equity shares were issued to Asian Development Bank
(ADB) and ADB now holds 13.84% stake in the equity of SBICAPS.
Being a part of the State Bank Group, SBICAP enjoys full support from SBI & its Indian associates and its
overseas subsidiaries. This has helped it in developing direct links with several Multilateral Agencies and
International Financial Institutions.
No.1 Fund Mobiliser in the Country, raised over Rs. 1,15,490 crores through public, rights issue and
private placement of equity & debt during the past 5 years.
Pioneer in Securitisation: Accomplished the first true Securitisation in the power sector in the country
and the only investment bank to be co-opted on the RBI’s Working Group on Asset Securitisation as a
Special Invitee.
Pioneer in Privatisation in the Country.
Advisor to Government of India on crucial issues like studying India’s Power requirements and Role of
Central PSUs, Securitisation of SEB overdues and the only non-lending institution to be a participant in a
nodal committee set up by the Ministry of Power.
Strong relationship with the Government, having worked for several fund-raising, strategic sale and
other advisory transactions for Government of India and several State Governments.

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SBICAP STEEL CREDENTIALS
Mackeil Ispat
& Forging Ltd.

Bramhani Bhushan Conros Steels

Industries Ltd. Power & Steel Pvt Ltd
Setting up 1.9 Limited Setting up a
MTPA Integrated 36,000 TPA FB and NFB
Steel Plant Forging Unit working Capital
Capacity
Limits
Expansion by 0.8
Jan 2009 MTPA

Advisor & Debt Dec 2008

Jan 2009 Nov 2008
Arranger Advisor & Debt
Advisor Arranger Advisor

Action Ispat &

Bhushan Steel Power Ltd.
BMM Ispat Ltd.
Ltd. Jewels Setting up
Seamless Ltd. Setting up of Sponge Iron
Setting up of pellet plant. Coke Plant, Captive
300,000 MTPA Setting up of oven plant and Power Plant, Ferro
Large Diameter 150,000 MTPA SS captive power Alloys Plant &
ERW Pipes Plant Wire Rod Plant plant at Hospet, Coal Washery
Karnataka

Sep 2008 Sep 2008 Aug 2008

Sep 2008
Advisor Advisor Advisor
Advisor

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SBICAP STEEL CREDENTIALS

New Tech
Forge & Uttam Galva
Foundry Ltd. JSW Steel Ltd. Jindal Steel & Metallics Ltd.
Power Ltd.
Enterprise Capacity Setting up 270 Setting up
Valuation Expansion by 3.2 MW Captive 550,000 MTPA Pig
MTPA Power Plant Iron Plant

Aug 2008 Jul 2008 Jul 2008 Jul 2008

Advisor Advisor & Debt Advisor & Debt Advisor & Debt
Arranger Arranger Arranger

Topworth
JSW Steel Ltd. Pipes & Tubes
Jindal Steel & Limited
Jindal Steel & Power Ltd.
Power Ltd.
Setting up 2 Valuation of 6
Setting up
Setting up of 4 MTPA DRI Plant Iron Ore Mines in
340,000 MTPA
MTPA Integrated Chile
Steel Pipes Plant
Steel Plant
Jun 2008 May 2008
Jun 2008 May 2008
Advisor & Debt Advisor
Advisor Arranger Advisor

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SBICAP STEEL CREDENTIALS
Neelachal
Kharkia Steels Ispat Nigam
Pvt. Ltd Ltd.
JSW Steel Ltd. Hazira Plate
Limited
Appraisal for Setting up Rolling Integrated Steel
development of 4 Mill of Capacity Plant an Iron Ore Setting up 1.5 mn
iron ore mines in 1,00,000 TPA Mines MTPA Plate Mill
Chile

Mar 2008 Mar 2008 Jan 2008

Apr 2008
Advisor & Debt Advisor Advisor
Advisor Arranger

SKS Ispat &

Divine Alloys Jindal Steel & JSPL – ECA
Power Ltd
& Power Co. Power Ltd.
Setting up 18 Ltd. Financial
MVA Ferro Alloys Setting up of 1.2 Appraisal for 4
Plant &30 MW 180000 TPA Mini MTPA Plate Mill MTPA Steel Plant
power Plant Integrated Steel for ECA Lenders
Plant
2008 Nov 2007 Oct 2007
Advisor & Debt 2008 Advisor & Debt
Arranger Arranger Advisor
Advisor

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SBICAP STEEL CREDENTIALS

Brahmani
Corporate River Pellets
Ispat Alloys Ltd. Magnum Jindal Steel &
Ltd. Steels Ltd Power Ltd.
Setting up of 4
Setting up of 4 MTPA Iron Ore Setting up of Setting up of 2
Lakh TPA HR Pelletisation Plant Integrated Steel MTPA DRI Plant
Steel Plant Plant
Sep 2007
Sep 2007 Sep 2007 Sep 2007
Advisor & Debt
Advisor Arranger Advisor Advisor

Asian Ispat Action Ispat &

Jindal FZC Maheshwary Power Ltd.
Stainless Steel Ispat Ltd.
Ltd. Setting up 0.23
MTPA Galvanizing Integrated Steel Setting up of
Plant at Dubai Plant, Orissa Sponge Iron &
Orisa – Phase II
Steel Billets Plant
Stainless Steel
Plant 2007
May 2007 Advisor & Debt May 2007
Aug 2007
Advisor Arranger Advisor
Arranger

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SBICAP STEEL CREDENTIALS
Saravana Bhubee
Alloy Steels Profiles Pvt.
Pvt. Ltd. SAIL-Malvika Adhunik Alloys Ltd.
Steel Financial & Power Ltd.
Viability Hot Rolled Plate
Setting up TMT Steel Plant,
Manufacturing
Bars & Sponge Financial Viability Jharkhand
Facility, Orissa
Iron Plant for acquisition of
Malvika Steel by 2007
SAIL 2007
Feb 2007 Advisor
Jan 2007 Advisor & Debt
Advisor Advisor Arranger

Atibit s

Industries
SKS Ispat &
Company Ltd. Essar Steel JSPL – Bolivia
Power Ltd
Sharjah FZC Project
Setting up Rolling
Pellet Plant, Bid Advisory –
Rebar Mill Project Mill of Capacity
Jharkand Bidding for
2,34,000 TPA
Concession of
Iron ore Mines in
2006 Bolivia
2007 2006
Advisor & Debt May 2006
Advisor Advisor Arranger
Advisor

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SBICAP STEEL CREDENTIALS

Mangilal
Rungta
IFCI – Nova
Iron & Steel Gangotri Iron Adhunik
Valuation & Steel Co. Mettaliks Ltd.
95000 TPA Ferro
Alloy Plant, Orissa Ltd.
Integrated Steel
Business TMT Bar Plant, Plant, Orissa
Valuation of Nova Bihar
Iron & Steel Ltd.
for IFCI 2006
2006 2006
Sep 2006 Advisor & Debt
Advisor Advisor
Advisor Arranger

Ind Synergy SKS Ispat &

Maithan Ispat Power Ltd JSPL –
Ltd.
Ltd. Setting up Rolling
Raigarh Plate
Setting up of Mill of Capacity Mill
Integrated Steel 2,24,000 TPA
Phase III of steel
Plant Setting up of 0.9
Project
MTPA Plate Mill
2005
2006 2006 Dec 2005
Advisor & Debt
Advisor Advisor Arranger Advisor

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SBICAP STEEL CREDENTIALS
BMM Ispat
Electrotherm Ltd.
Bhushan Ltd. Jindal Steel &
(India) Ltd.
Power Ltd.
Mini Steel Plant, 1 million 1.75 MT Mild 1.2 MMTPA Pellets
Kutch, Gujarat integrated Sponge Steel Plant Plant
Iron Project
2005
2005
2005 Advisor & Debt
2005 Advisor
Advisor Arranger
Advisor

Maheshwary
JSW Steel Ltd. Ispat Ltd.
Essar Steel Neelachal
Ltd. Ispat Nigam Expansion of
Ltd. Integrated Steel
Integrated Steel
1.5 MMTPA Plate Plant
Mill Project Refinancing of Plant
High cost Debt

2005 2005 2005

Advisor & Debt 2005
Debt Arranger Advisor & Debt
Arranger Debt Arranger Arranger

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THANK YOU

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