## Mixed Borrowings – Overview
When a qualifying asset is funded partly by specific borrowings and partly by general borrowings, the two components are calculated independently and then added together.
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## How to Split Expenditures
| Expenditure Tranche | Funding Source |
|---|
| Up to the specific borrowing amount | Funded by specific borrowings |
| Amount beyond specific borrowings | Funded by general borrowings |
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## Step-by-Step Process
1. Calculate capitalisation rate for general borrowings (exclude specific borrowing from WACC)
2. Calculate specific borrowing interest = Specific loan amount × Rate × Time (less temporary investment income)
3. Calculate general borrowing interest = Each GB-funded expenditure tranche × Cap Rate × Months/12
4. Total = Specific BC + General BC
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## Diagram
```
Total Expenditure on QA
├── Funded by Specific Borrowing
│ → Actual Interest on Specific Loan (less temp investment income)
└── Funded by General Borrowings
→ Each Tranche × WACC × Time Fraction
```
### Example 1
Mixed Borrowing — Full Illustration:
Specific Borrowing (01-Apr-Y1): ₹30 cr @ 10%
General Borrowings:
- ICICI Bank (01-Apr-Y1): ₹100 cr @ 12%
- HDFC Bank (01-Apr-Y1): ₹75 cr @ 14%
- Kotak Bank (01-Jul-Y1): ₹125 cr @ 8%
Expenditures on qualifying asset:
- 01-Apr-Y1: ₹50 cr → ₹30 cr from Specific, ₹20 cr from General
- 01-Jul-Y1: ₹75 cr → from General
- 01-Jan-Y2: ₹25 cr → from General
Construction: 01-Apr-Y1 to 31-Mar-Y2
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Step 1 – Capitalisation Rate (General Borrowings only):
Note: Kotak joins 01-Jul-Y1 → weight = 9/12
| Bank | Principal | Weighted Principal | Rate | Weighted Interest |
|---|
| ICICI | 100 | 100 × 12/12 = 100 | 12% | 12.00 |
| HDFC | 75 | 75 × 12/12 = 75 | 14% | 10.50 |
| Kotak | 125 | 125 × 9/12 = 93.75 | 8% | 7.50 |
| Total | | 268.75 | | 30.00 |
Cap Rate = 30.00 / 268.75 × 100 = 11.16% p.a.
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Step 2a – Specific Borrowing Interest Capitalised:
₹30 cr × 10% × 12/12 = ₹3.00 cr
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Step 2b – General Borrowing Interest Capitalised:
| Date | GB Amount | Rate | Months | BC (₹ cr) |
|---|
| 01-Apr-Y1 | 20 cr | 11.16% | 12/12 | 2.23 |
| 01-Jul-Y1 | 75 cr | 11.16% | 9/12 | 6.28 |
| 01-Jan-Y2 | 25 cr | 11.16% | 3/12 | 0.70 |
| GB Total | | | | 9.21 cr |
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Total Borrowing Cost Capitalised = 3.00 + 9.21 = ₹12.21 cr