SBI Capital Markets arranges Rs11.7bn from a consortium of 13 Banks for the phase I development of Greenfield all weather deep water multipurpose port at Gangavaram, near Vishakapatnam, Andhra Pradesh.

A Consortium of 13 Banks led by State Bank of India have committed long term senior & subordinate loans aggregating Rs11.7bn to Gangavaram Port Limited (GPL), a special purpose company promoted by D.V.S. Raju for developing and operating Gangavaram Port. The financing documentation for the loans was completed recently.

The deal has been structured by SBI Capital Markets Limited (SBICAP), as the Sole Financial Advisor & Arranger to GPL for this transaction. The transaction is unique and the first of its kind in the country, as it is the largest transaction yet in India of a merchant greenfield port financing on non-recourse basis at a leveraging of 69:31.

Contracts have been awarded the much required impetus to development of the truly next generation seaports in the country, and especially the Visakhapatnam Region on the East Coast of India, which today is recognized as the gateway for increasing trade with China and ASEAN region.

Gangavaram Port will be developed in 3 phases over the next 15-20 years with a cargo handling capacity of over 100 MTPA. The Phase I development comprises 5 berths and associated infrastructure for handling iron-ore, coal and other bulk and general cargo and will be operational by the end of 2007.

Gangavaram Port will be the deepest port in the country with facilities to berth and handle super-cape size (200,000dwt) bulk carriers. The Port will be an all weather, multi – purpose port with excellent hinterland rail/road connectivity, vast storage areas, and very high levels of mechanisation in cargo handling, thus providing, considerable savings in the integrated logistics cost to the port users.

SBICAP has effectively structured the transaction so as to enable the future receivables of port usage to be used by GPL to repay the loans which have been raised at an attractive rate of under 9% p.a. for the 14 year facility.

According to D.V.S. Raju, Chairman and Managing Director of GPL, "the key to developing such a green-field, with the help of modern infrastructure and private money, lies in making the business model bankable by effectively de-risking it." He also added that "The long-tenure non-recourse project finance debt at an attractive rate not only reposes the faith of the lenders in GPL’s business model but will also enhance the financial robustness of the operations."

SBICAP is currently ranked 2nd amongst global mandated lead arrangers’ in the Asia Pacific Region by Project Finance International. On the occasion of the completion of the deal Mr. Indrajit Gupta, MD & CEO, SBICAP said "Infrastructure development holds the key to the long term and sustained growth of the country’s economy, while the availability of long term debt finance from the domestic markets supports the cause by mitigating financing related uncertainties to a large extent. SBICAP is currently mandated for long term debt fund arranging to the tune of over Rs 24,000 crore and is confident of delivering the same."