Fiat India to raise $510 m

FIAT India Automobiles, a joint venture between Tata Motors and Fiat, is close to finalising a loan of $510 million - about Rs 2,458 crore at current exchange rates - for its capex and working capital programmes. The loans include a rupee term loan, a working capital loan and an export credit agency (ECA)-backed overseas loan, according to people close to the development..

Fiat India Automobiles, a 50:50 joint venture formed in 2007, manufactures Fiat and Tata cars and also produces transmission sets and engines. The term loan of Rs 1,000 crore has a door-to-door maturity of six years while the ECA loan of euro 130 million (around Rs 900 crore) has a door-to-door maturity of eight years. The working capital loan of Rs 600 crore has tenure of one year, said people familiar with the matter.

Citi was the sole arranger for the loans. The rupee term loan and the working capital loan were given by State Bank of India, IDBI Bank, Punjab National Bank and Union Bank of India. When contacted, a Fiat India spokesperson said: "The company is discussing and finalising financing proposals with bankers to fund the company's originally planned operations. There is no change in production capacity." The original funding plan of 1:1 between rupee loan and ECA was subsequently revised to 2:1 on the back of rupee liquidity, said sources.

The benefit of an ECA-led loan is that because of the guarantee that typically comes in such a case, the interest cost on the loan comes down drastically and the borrower is able to get a longer tenure loan. However, the interest costs on these loans are not known. The Tata-Fiat JV plans to invest close to Rs 4,020 crore in its Ranjangaon facility near Pune.