(Bloomberg) — Chennai Petroleum Corporation Ltd. is in talks with banks to raise a 280 billion rupee ($3.3 billion) loan to help build a major oil refinery in the south of India, people familiar with the matter said.
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The state-owned company has already received expressions of interest, and State Bank of India will lead the transaction, according to the people, who asked not to be named as the deliberations are private. It would be second-biggest local-currency loan in India this year.
The funds will help build a proposed 9 million-ton-a-year oil processing plant in the southern state of Tamil Nadu, which has a total cost of around 330 billion rupees. Chennai Petroleum Finance Director Rohit Agrawala said in April that the project would take 36 months to complete, once it has been approved by the federal government.
A representative for Chennai Petroleum didn’t respond to a request for comment.
State-owned Indian Oil Corp. — the country’s biggest refiner and Chennai Petroleum’s majority shareholder — is in the midst of a rapid expansion to raise production of fuels like diesel and gasoline to meet surging domestic demand. India is a rare bright spot for a global refining industry that’s in decline in the US and Europe, and becoming more focused on petrochemicals in China due to transport decarbonization.
National Iranian Oil Co. is also an investor in Chennai Petroleum, with its subsidiary Naftiran Intertrade Co Ltd holding a 15.4% stake. However, the Iranian firms aren’t directly participating in building the new refinery. Indian oil will own 75% of the new plant – called the Cauvery Basin refinery project — and Chennai Petroleum will have the rest.
SBI Capital Markets, a unit of State Bank of India, will be loan syndication adviser to Chennai Petroleum, the people said.
The largest local-currency loan in India this year also looks likely to go to an oil refiner. Bharat Petroleum Corp. is in talks with lenders to raise about 320 billion rupees ($3.8 billion), Bloomberg News reported at the end of August.
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