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The Essar group has pledged a portion of its holding in Hutchison Essar, its joint venture with Hong Kong's Hutchison Telecommunications International, to raise $530 million (around Rs 2,425 crore).
The diversified Essar group holds a 33 per cent stake and Hutchison the balance, in the country's fourth-largest mobile company.
Investment banking sources said the group had appointed Standard Chartered Plc to arrange the loan, which would be repaid in two years. The group intends to raise $410 million and the equivalent of $120 million in rupees.
They added that raising loans would not be an issue, going by the valuation of Hutchison Essar. Lehman Brothers has valued the company at $11.2 billion, which makes the Essar holding worth $3.73 billion (around Rs 17,000 crore).
An Essar group spokesperson said the loan would be used to finance the group's ongoing expansion plans. The group has been on an expansion drive through a host of companies.
Essar Hazira is in the process of scaling up capacity with an investment of Rs 6,500 crore; Hazira Platemills is to invest Rs 2,000 crore (Rs 20 billion) for setting up a 1.9 million tonne plant; and the group's holding company, Essar Global, has signed agreements to set up steel plants having a combined capacity of 12 million tonnes in Chhattisgarh, Orissa and Jharkhand with a capital outgo of Rs 25,000 crore (Rs 250 billion).
Essar Global is also expanding its base in Qatar, Iran and Sharjah.
The Essar group is currently consolidating all its businesses in India and worldwide under a Cayman Islands based global holding company, Essar Global.
The restructuring process has been under way for the last six months and Ernst and Young has been guiding the group in this.