HSMC in talks with EXIM bank of US and Japan for funding

Hindustan Semiconductor Manufacturing Corporation (HSMC), which leads one of the consortiums for setting up a semiconductor fabrication unit in the country, is in talks with the Export-Import Bank of the United States and Japan's JBIC for funding the facility, said Devendra Verma, chairman, CEO and founder of HSMC.

Verma told Business Standard that the company has approached US EXIM Bank and Japan Bank for International Cooperation (JBIC) with a proposal to co-invest in the fabrication or fab unit. The discussions are at the final stage, Verma indicated, adding that the "due diligence process" is currently going on. HSMC is seeking funding between $3.5-4 billion for the project.

The company has partnered with ST Microelectronics and Silterra to set up a unit at Prantij near Gandhinagar in Gujarat.

In an email response to Business Standard, a spokesman for US EXIM Bank said that it has received an application for financing by the company. On what are the prospects of HSMC getting the funding, the spokesman said, "EXIM Bank considers all applications for financing on a case-by-case basis. Among the chief factors in our decision-making calculus are US job support, reasonable assurance of repayment, and additionality (need for EXIM involvement)."

A spokeswoman for JBIC said in an email response, "We are pleased to know that you are interested in our activities. Unfortunately, we are sorry not to be able to answer for detailed questions regarding the project."

Two years earlier, the government had given in-principle approval for two proposals to set up units and was ready to subsidise as much as 40 per cent of the project cost. While one group is led by Jaiprakash Associates (Jaypee) the other is by HSMC.

Business Standard had reported earlier this month that both the consortiums were having difficulty in tying up funding for the projects. However, Verma clarified that it is "serious discussions" with both the agencies and is also exploring the possibility of bringing on board a strategic partner. "We will communicate the same to the government soon," he said.

Setting up a fab project is supposed to be central to the past and the current government's efforts to boost domestic electronic manufacturing in the country. India imports a majority of its electronics and the government expects the country to import electronic goods worth almost $300 billion, of its total demand of $400 billion by 2020. India's electronics import bill could, thus, exceed that of oil. Local fabrication (fabs) will reduce import, stimulate investment in the economy and create jobs.