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Essar group in talks for $900 million loan

MUMBAI (Reuters) - India’s Essar group plans to raise $900 million via a 2-½ year loan, by pledging a part of its stake in the country’s third-biggest mobile firm, Vodafone Essar, two sources with direct knowledge of the deal, said.

SBI Capital Markets, a unit of top lender State Bank of India, and Barclays Capital are in the race to arrange the funds and could end up sharing the deal, the banking sources said, declining to be named.

Both the lenders are in discussions with Essar at a rate of below 11 percent, they said, adding the funds could be arranged in the next two weeks.

“We have got a commitment for a majority of the required funds from institutional investors and banks,” said one source, who is directly involved in the deal.

“They are looking at 2-½ year money and we are offering a range of 10.0-10.5 percent,” the second source said.

Essar Teleholdings Ltd, which owns a third of unlisted Vodafone Essar, will pledge about 11 percent of its holding to raise the money, the sources said.

Vodafone Essar is majority owned by Britain’s Vodafone Plc.

The sources said Essar Teleholdings, which controls the group’s telecom holdings, would use the money to invest in group businesses that span telecoms, steel, shipping, oil and construction.

India is the world’s fastest-growing mobile market, adding more than 10 million subscribers a month. Vodafone adds more than 2.5 million subscribers a month. ($1 = 48.2 Indian rupees)