HPCL Refinances ₹50,000 Crore Debt for Rajasthan Refinery to Cut Interest Costs

Hindustan Petroleum Corp. (HPCL) has successfully refinanced about ₹50,000 crore of debt associated with its Rajasthan refinery project. According to Chairman and Managing Director Vikas Kaushal, the move secures a borrowing cost reduction of roughly 105 basis points and aims to achieve annual interest savings of approximately ₹1,000 crore through a comprehensive financial restructuring.

The refinancing initiative, which became effective on October 3, is projected to directly save the company between ₹470 crore and ₹550 crore annually. Additional measures, including equity infusions, the conversion of subordinated loans into equity, and interest-free state support, are designed to ease the financing burden as operations ramp up at the facility.

The 9 million tonne per year refinery is located at Pachpadra in the Balotra district of Rajasthan. It was built at a total cost of ₹79,459 crore through a joint venture, HPCL Rajasthan Refinery Limited (HRRL), where HPCL holds a 74 per cent stake and the Government of Rajasthan holds the remaining 26 per cent.

As part of the part-refinancing arrangement, HRRL secured ₹8,000 crore in rupee term loans from a consortium comprising the National Bank for Financing Infrastructure and Development (NaBFID), India Infrastructure Finance Company Limited (IIFCL), ICICI Bank Limited, UCO Bank, and Punjab & Sind Bank. Additionally, the company obtained a ₹2,000 crore working capital demand loan from Bank of Baroda along with ₹400 crore in fund-based and non-fund-based credit facilities from ICICI Bank.

The proceeds from the term loans are allocated for part-refinancing existing project loans, while the working capital facilities are intended to support day-to-day operations and manage cash flow mismatches for the project and its allied utilities.

Kaushal noted that the financial restructuring is intended to strengthen the economics of the refinery as it scales toward full operating capacity. The facility officially declared its commercial operation date on June 22 and is presently running at about 60 per cent utilisation.

Support from the Rajasthan government has also contributed to the restructuring. During the September quarter, the state government infused ₹1,500 crore of equity into the refinery. Concurrently, HPCL converted ₹4,300 crore of subordinated loans into equity, a step expected to trim interest costs by roughly ₹350 crore. Furthermore, the state has committed to providing about ₹1,100 crore annually in interest-free loans, with the initial instalment already disbursed.

Operations at the facility are scaling up steadily. Almost all secondary processing units are operating in hot circulation, and the company expects throughput to reach an annual run rate of 8 million to 9 million tonnes around December. Product shipments have also climbed, with October shipments projected to exceed 400,000 tonnes and generate revenues of over ₹4,000 crore for the month.

"Large-scale capital-intensive projects require active balance sheet management to weather market volatility. HPCL's strategic move to refinance debt, convert loans to equity, and secure state-backed financial support demonstrates a disciplined approach to lowering borrowing costs and improving project economics as operations scale toward full capacity." — Dr. Shishir Gupta, Founder & CEO, StartupLanes