Five State Firms To Tap Bond Street For The Last Time

Five Maharashtra-promoted irrigation development corporations are bracing for their last run in the bond market by offering secured non-convertible debentures (NCDs) aggregating Rs 1,450.23 crore.

Last, because from the next financial, year a special purpose vehicle -- the Maharashtra Patbandhare Vittiya Company (MPVC) Ltd -- will takeover the task of garnering and allocating resources for the five cash-strapped corporations.

In fact, MPVC, which was set up in September 2002, will shortly be testing the waters with its maiden Rs 500 crore NCD issue along with the five corporations -- the Godavari Marathwada Irrigation Development Corporation (GMIDC), the Konkan Irrigation Development Corporation (KIDC), the Maharashtra Krishna Valley Irrigation Development Corporation (MKVIDC), the Tapi Irrigation Development Corporation (TIDC) and the Vidarbha Irrigation Development Corporation (VIDC).

A large chunk of the funds now being raised by the five will be used for servicing the interest and repaying the principal of earlier series of NCD issues.

Large investments sunk into the irrigation projects is one of the important factors contributing to the adverse fiscal position of the state. The fiscal stress from this sector arises not only from servicing the debt incurred for investments but also on account of limited recovery of costs of operation and maintenance.

Tapi IDC has already entered the bond market to raise Rs 107.15 crore through private placement of NCDs. This issue has three options - 7 years tenor with a put/call option at the end of the 5th year offering a 11 per cent coupon; 10 years tenor with a put/call option at the end of 7th year offering a 11.25 per cent coupon; 12 years tenor with a put/call option at the end of 10th year offering a 11.50 per cent coupon. The issue opened on March 3 and closes on March 31. Credit rating agency has rated the issue 'Care BB (SO)'.

Konkan IDC is also in the market with a Rs 89.59 crore NCD issue. Terms of the issue are the same as Tapi IDC. It is gathered that KIDC has not yet made allotments of the earlier Rs 89 crore bond issue, which closed in November 2002.

Vidarbha IDC, Godavari Marathwada IDC, MKVIDC are planning NCDs issues for Rs 504.55 crore, Rs 348.57 crore and Rs 400.37 crore. According to sources, the National Stock Exchange has put a spoke in MKVIDC's bond issue as it has reportedly not serviced earlier series of NCD issues.

The cash-strapped the Maharashtra Krishna Valley Irrigation Development Corporation (MKVIDC) was in the eye of a storm a year ago as it defaulted on interest payments of about Rs 75 crore to institutional players.