UPDATE 1-India's Lanco Infratech to raise $2 bln for power plants

Last Updated: Mon, Nov 26, 2012 17:10 hrs

(Adds market reaction, details)

MUMBAI, Nov 26 (Reuters) - Indian engineering and construction company Lanco Infratech plans to raise $2 billion from Chinese banks and financial institutions to fund new power projects.

The fundraising will be led by state-controlled China Development Bank, which is to lend $600 million, Lanco Infratech said in a statement on Monday.

Chinese bank lending to Indian power companies is often on the condition that Chinese manufacturers supply equipment for the new projects.

The proceeds will be used on two power projects in India's nothern state of Uttar Pradesh.

"For the past couple of quarters we have been working on strategies to address the liquidity concerns due to delay in receivables from utilities," Lanco Chairman L. Madhusudhan Rao said. "We are also in the process of addressing the debt equity ratio at the same time."

The two power projects will have a combined capacity of 2,640 mega watts, a Lanco official told Reuters, declining to be named because he is not authorised to speak to the media.

The fundraising is expected to be completed by the end of the year, the Lanco official added.

Chinese bank lending to Indian power companies is usually tied to the purchase of equipment from Chinese manufacturers.

Lanco Infratech shares were up 3.7 percent at the close, against a 0.2 percent rise for the main Mumbai market index . (Reporting by Sumeet Chatterjee; Editing by David Goodman)

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