REC shelves plan to raise $700 mn from overseas

KOLKATA: The global liquidity crisis has forced Rural Electrification Corp (REC) to put its $700-million external borrowings plan on hold. REC had recently received RBI clearance to raise $500 million through external commercial borrowings and $200 million by way of external commercial assistance. But with interest rates rising following the liquidity crunch, REC has decided to shelve borrowing plans at least for the next 3-6 months.

���External borrowing has become too costly now. We may not look at this option for another three months,��� REC director (finance) HD Khunteta said. The state-run firm is now planning to strike structured financing deals with private banks. REC is in the corporate bond market to raise Rs 300 crore.

The company has offered interest rates between 11.15% and 11.35% for five to 10 years. According to investment bankers associated with the issue, the response is lukewarm even at such high rates. ���Till Tuesday, the penultimate day for the issue, REC received commitments for just about Rs 100 crore,��� an investment banker said. Mr Khunteta is, however, hopeful, of getting full subscription on the last day.

He said REC is looking at various options for raising capital but refused to give details. ���Typically, we need about Rs 1,000 crore every month. So, it���s normal that one looks at several ways to raise funds as the external source is no longer viable now.��� REC plans to raise Rs 14,000-15,000 crore in 2008-09.