Road to expansion: HPCL to raise $500 m in medium-term bonds

Hindustan Petroleum (HPCL) is planning to raise $500 million in medium-term bonds for its expansion projects in the January-March quarter of 2019, a senior company official said.

J Ramaswamy, director, finance, HPCL, told FE, “The company will start the prepartory work by November-December and will hit the market in the January-March quarter. The tenure of the bond will depend on the inflows from the expansion projects, which will start from July onwards.”

“We will mostly be looking at the 5-year tenure as it would not be prudent to go for the 10-year bonds as we will have to match the bullet repayment with project inflows.” The inflows from some of the refinery expansion at Mumbai refinery and Vizag projects are expected by 2022, while other projects like the greenfield Rajasthan refinery project will happen over the next five years, he said.

The company is also likely to look at the domestic market to raise funds as compulsorily hedging the infrastructre projects makes the interest rates as good as foreign markets, Ramaswamy said.

The company has undertaken the expansion of Mumbai refinery to 9.5 mtpa from 7.5 mtpa at a cost of `5,060 crore, while the 9 mtpa Barmer refinery in Rajasthan is a greenfield project.

The company is also one of the partners in the 60 mtpa Ratnagiri Refinery and Petrochemicals project in Maharashtra along with two other PSU players — IOC and BPCL.

Last year, HPCL in its maiden foray into the international market raised $500 million in 10-year bonds at a semi-annual coupon rate of 4%. “The rates have gone up by 0.75% as of now in the international market, which makes the domestic market equally competitive,” Ramaswamy said.

The company also took shareholders’ approval to raise `12,000 crore and has identified `75,000 crore as capital expenditure over the next five years. Around `8,450 crore will be spent in FY19.

Hindustan Petroleum Corporation Ltd.(HPCL)