BPL Mobile achieved financial closure on Monday, after a cost over-run of around Rs 600 crore (Rs 6 billion) and a time over-run of two years.
Industry sources said the finance ministry played a key role in pushing the financial closure of the project. Rajeev Chandrasekhar, chairman and managing director of BPL Mobile, had complained to Finance Minister Jaswant Singh about banks delaying the closure.
In fact, the Reserve Bank of India investigated the role of ICICI Bank, the lead bank of the consortium, for the two-year delay.
Banks and financial institutions are believed not to have taken any new exposure in the company. They are converting the unpaid interest of over Rs 300 crore (Rs 3 billion) into debt.
The promoters of BPL will now bring in over Rs 300 crore (Rs 3 billion) as part of the debt restructuring cleared by the institutions.
However, sources close to the development said banks had not limited their exposures to BPL.
The total cost of the project is now being pegged at around Rs 3,400 crore (Rs 34 billion), against the earlier estimate of Rs 2,800 crore (Rs 28 billion).
The lenders' consortium includes the Industrial Development Bank of India, ICICI Bank, Infrastructure Development & Finance Company, Bank of India, the Life Insurance Corporation and ABN Amro. Of the total debt, Rs 1,112 crore (Rs 11.12 billion) has been disbursed as a bridge loan.
The average interest cost of the project will come down from 17 per cent to around 14 per cent, following the waiver of the penal interest clause.
BPL Mobile executives declined to comment on the issue immediately, but said they would brief the Press in a few days.
Referring to the RBI's investigation, ICICI Bank Executive Director Kalpana Morparia said: "This was an academic exercise. The finance ministry flagged off the issue to find out the reasons for delay in financial closure of infrastructure projects."
According to RBI sources, ICICI Bank made a presentation to RBI Deputy Governor Vepa Kamesam on the delay in BPL Mobile's financial closure.
Going by the presentation, the project appraisal was based on old licence fee projections but the revenue model was changed later, leading to the delay, the bank said.
"We extended 90 per cent of the loans even before the financial closure," Morparia pointed out.
Banking sources said the company could not tie up vendor credit and other bridge finance, which led to the delay in the financial closure.
BPL Mobile has a licence to operate in Maharashtra, Tamil Nadu and Kerala.