IL&FS Transportation: looking to save interest cost by refinancing

Many entities in India are debt ridden, and a huge amount of cash is going into paying interest on these debts. But it seems that falling interest rate is giving some cushion to these firms to refinance their debts with the aim of lowering their cost of funding.

With the same objective at the fore, IL&FS Transportation plans to refinance its Rs 9000 crore debt. 

The Company is expected to refinance loans worth Rs 6000 crore on a project level and around Rs 3000 crore on a corporate level by issuing non-convertible debentures. The timing of the NCDs is not confirmed. After issuing NCDs and refinancing, the average interest rate is expected to come down by 200 basis points from 11.5-12.75 per cent to 8.5-10 percent. After refinancing the debt, the Company would be saving an amount of Rs 300-400 crore, due to lower interest outgo, because of both project and corporate level refinancing and NCD issuance.

In FY16, IL&FS Transportation’s total debt level stands at Rs 27,643.06 crore and for the same period company incurred interest cost of Rs 2,545.53 crore.