Reports suggest that Essar Oil plans to raise dollar loans in order to repay some of its rupee loans in order to benefit from the interest differential between these two loans.
According to media reports, the company plans to swap rupee loans worth $2.2 billion or Rs 11,700 crore with dollar loans.
The company is reportedly conducting road shows for raising dollar loan following the runaway spike in its share price, which has shot up 31 per cent since January 1, compared to the two per cent rise in the BSE benchmark Sensex during the same period.
The company is said to be discussing with foreign investors to swap its costlier rupee loans with dollar loans after getting the permission from the Reserve Bank of India.
It may be noted that the cost of foreign loans, without any forward cover, is around six per cent when compared to Indian loans, which are raised at an average rate of 12 to 13 per cent.
Recently, Reliance Industries (RIL) launched its first perpetual bond, which received overwhelming response from foreign investors.
On the back of a huge tax liability, reduction in the interest cost would benefit Essar Oil. It may be recalled that the company made provisions for Rs 6,169 crore worth of sales tax to the Gujarat government after the Supreme Court rejected its appeal to retain the tax under the Gujarat capital investment intensive scheme.