Lanco Infratech Ltd., an Indian electricity producer controlled by billionaire L. Madhusudhan Rao, plans to borrow about $5.6 billion to expand power generation almost fourfold in four years.

The company aims to raise up to $2.2 billion of debt overseas, and will borrow the remainder from local banks in the next 15 months, Rao said in an interview. Lanco will spend $1.4 billion of its own cash as it builds plants to generate an additional 6,000 megawatts by March 2015, he said.

Indian power developers including Lanco and Reliance Power Ltd. are expanding generation capacities as the nation’s accelerating economic growth fuels demand for more electricity. Prime Minister Manmohan Singh aims to add 120,000 megawatts of power by 2017 to reduce blackouts and plug a deficit of 10.5 percent during peak hours that threatens to scuttle development.

“The growth rate is going to be there,” Rao, 45, said on May 12 in his office at Gurgaon near New Delhi. “What we are trying to create today is a small portion of the opportunity we have in the future.”

Lanco, which also has a construction business, plans to increase total power generation capacity to 15,000 megawatts by 2015, he said. The company currently produces 3,300 megawatts and is building plants to reach 9,300 megawatts by December 2013, Rao said.

India’s central bank this month raised key interest rates for a ninth time since March 2010, prompting Goldman Sachs Group Inc. to forecast growth in Asia’s third-biggest economy may slow in the year started in April.

More Expensive

The cost to raise rupee funds for India’s infrastructure has become more expensive compared with dollar-denominated debt borrowed overseas. The difference between five-year rupee benchmark rates for top-rated companies and dollar costs was at 456 basis points on May 13, near a record reached two days earlier.

The company will consider borrowing from Chinese lenders and the U.S. Export-Import Bank, Rao said.

Lanco had a debt of 83.2 billion rupees ($1.8 billion), according to Bloomberg data. Lanco’s profit has more than doubled in three years.

The company expects revenue from its construction and power generation business to grow to 500 billion rupees by the year ending March 31, 2015, Rao said. Sales, including of units, increased 34 percent to 81.08 billion rupees in the year ended March 31, 2010. Lanco will announce earnings for the last fiscal year on May 29.

Lanco, which bought Australia’s Griffin Mining Co. earlier this year, is examining a bid for the Premier Coal unit of Wesfarmers Ltd., Rao said.

Rao, with $2.3 billion of assets, is ranked India’s 29th richest, according to Forbes magazine.