Vayuvega Wind needs Rs 1,500 crore for new capacity. It is close to its leverage covenant and is listed both in India and overseas at different multiples. Should it raise debt or equity, and in which market?

Raise equity, and raise it in India. All debt takes leverage to 6.0x against a 5.0x covenant while the farm earns nothing, so debt is ruled out. Equity is cheapest where the shares are valued highest: at 30x Vayuvega issues about 20.7 crore shares, against 28.2 crore at 22x overseas. The answer changes if the Indian market cannot absorb Rs 1,500 crore without a deep discount.

Capacity before cost. A household choosing between a loan and dipping into savings first asks whether the bank will lend at all. Here the covenant decides it: Rs 6,000 crore of net debt on Rs 1,000 crore of EBITDA is 6.0x, above the 5.0x limit, and the farm adds no EBITDA for two years. The covenant headroomThe gap between where a ratio stands and the limit in the loan agreement. Using all of it leaves no room for a bad quarter. is only Rs 500 crore, and a wind business whose EBITDA moves with the weather cannot run at exactly its limit.

Debt also loses on earnings. Rs 1,500 crore at 9.5% costs Rs 142.5 crore a year, Rs 107 crore after tax, cutting EPS from Rs 2.42 to Rs 1.35 until the farm earns. At 30x, new equity costs an earnings yield of 1/30, about 3.3%, against 7.1% for debt after tax, so on this one-year EPS measure equity is the cheaper money as well as the only one available.

The same share is on sale at two prices. Selling where buyers pay more means giving away less of the company for the same cash. At Rs 72.56 a share in India, Rs 1,500 crore needs 20.7 crore new shares, and new holders end up with 17.1% of Vayuvega; at Rs 53.21 overseas it needs 28.2 crore shares and gives away 22.0%. Existing holders keep more of every future rupee if the issue is done in India.

Three things, and naming them is what makes the answer specific. Depth: Rs 1,500 crore is about a fifth of Vayuvega's Indian market value, and if the issue needs a large discount to clear, the price advantage shrinks. Currency: a wind farm in India earns rupees, so rupee equity carries no currency mismatch, which favours India again. And the gap itself: if the two lines are freely exchangeable, a persistent 30x against 22x suggests something stops arbitrage, such as limits on moving shares between listings, and that is worth checking before assuming the price is real.

Close with the sequence as the interviewer will want to hear it: leverage rules out debt, the multiple picks the market, and the depth of that market sets how much can be raised there. Regulatory approvals and pricing rules for each type of issue differ by market and change over time, so the current rules should be confirmed before any of this goes to a board.