DCM Shriram to invest $143 mn in brownfield expansion project backed by IFC

IFC plans to provide a Senior Loan of up to $40 million (denominated in INR) in the form of a Non-Convertible Debentures (NCD).
DCM Shriram is planning to invest around $143 million in a brownfield expansion in Gujarat. The project will be backed by International Finance Corporation.

The proposed project is a 700 tons per day (TPD) brownfield expansion of its chlor-alkali plant at Bharuch in Gujarat, India along with a 500 TPD flaker plant and a 120 megawatt captive power plant. 

The Project is expected to cost approximately $143  million. IFCs investment would be used to fund the chlor-alkali plant expansion and flaker plant costing $89 million, along with long term working capital and routine capex. 

IFC plans to provide a Senior Loan of up to $40 million (denominated in INR) in the form of a Non-Convertible Debentures (NCD).

The proposed investment fits into IFC’s crisis response for Covid-19 financing and would help fill the company’s cash flow gaps and provide for timely completion of the project.

The captive power plant will be funded through the company’s internal cash flows, according to IFC, the World Bank's investment arm.

IFC's financing will also help to add around 100 permanent skilled jobs and 250 temporary jobs and preserve 800 temporary jobs during construction, as a result of the expansion. 

The expansion will also ensure the availability of caustic soda at competitive prices, and key raw materials to downstream industries such as aluminum, paper, detergents, agro-chemicals, and pharmaceuticals. 

IFCs investment is intended to promote the resilience of real sector markets, by ensuring continued supply of goods and services in sectors affected by reduced demand, price reductions and exchange rate volatility thereby mitigating the effects of the economic downturn. The chemicals sector, an important sector in India is already exposed to the effects of severe supply chain disruptions and slowing economic growth

The company will benefit from IFC's long tenor offering (10-year tenor) which is useful for companies such as DCM Shriram that operate in a largely cyclical business. IFC will play a countercyclical role providing liquidity to bridge any funding gap triggered by the effects of Covid-19.

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