RIL raises Rs 2,000 cr via Re bonds

Private sector companies have begun raising funds through the domestic corporate bond market after a gap of nearly five years. Reliance Industries (RIL) raised around Rs 2,000 crore through five-year bonds at an annualised coupon of 11.45 per cent today, according to a merchant banker associated with the deal. RIL has tapped the rupee bond market after nearly five years, and most merchant bankers said several private companies may also follow suit as investors’ appetite will increase.

RIL is also likely to raise close to Rs 5,000 crore through non-convertible debenture (NCD) to be issued to Life Insurance Corporation. Recently, four Tata Group companies had approached LIC for funds through NCD. Investors such as insurance companies, provident funds and other companies have shown interest in buying corporate papers because interest rates and yields are expected to fall.

“RBI is expected to cut rates further, so this is a good time to invest in bonds. Also, private companies may find more interest as investors will get a chance to diversify their portfolio,” said a merchant banker.

According to dealers, the yields on corporate bonds are likely to ease further by at least 50 basis points.

Gilt yields in the 10-year segment have already fallen by over 30 basis points in the last one week on expectations of interest rate cut by RBI.

Private sector companies have avoided the domestic bond market in the last four-five years, mainly because of the rising interest rate scenario and also as foreign currency loans were available at a cheaper rate.

With offshore dollar funding mostly drying up, merchant bankers now see more and more private sector companies coming out with bond locally to meet their fund requirements.

“Including regular borrowers and banks, I think there could be close to Rs 40,000 crore of supply in the next few months,” said the merchant banker. State-owned companies such as Power Finance Corporation, Rural Electrification Corporation and Indian Railway Finance Corporation regularly raise funds through bonds.

Power Finance has raised close to Rs 10,400 crore so far in 2008-09 (April-March) while Rural Electrification Corporation has raised nearly Rs 6,800 crore.