Debt Floats Deferred On Bank Rate Cut
The Reserve Bank of India's (RBI) decision to slash the bank rate by one per cent has led to postponement of some debt issues in the corporate sector. Merchant bankers were busy reworking the offerings of their clients.
"A new benchmark figure is very much on the cards," said Sidharth Kapur, senior vice-president, Apple Finance.
Finolex Cable's Rs 25 crore non-convertible debenture issue (NCD), which was expected to open yesterday, has been postponed by at least one week, according to sources. A couple of issues like Gridco, that were in the final stage of settlement, are also in the process of restructuring the issues to suit the changed environment.
Finolex, which is floating a Rs 25 crore non-convertible debenture issue with a greenshoe option of another Rs 25 crore had decided to reduce the coupon of 15.25 per cent.
Rated AA by Crisil, it has a five-year maturity period. Redemption facility of 30 per cent is at the end of third and fourth years, while the rest is at the end of the fifth year is also available.
"The deposit rate cut is likely to lead to a PLR cut sooner or later. In such a scenario it will be foolish to offer a higher coupon rate," said one merchant banker. He cited the fine rates offered by recent issues of Industrial Development Bank of India (IDBI) and Indian Petrocemicals Ltd (IPCL).
Despite initial resistance from bankers, both the companies successfully mopped up Rs 500 crore and Rs 450 crore respectively.
"We expect a new benchmark figure below 0.5 per cent to one per cent from the existing one to come up in a few days. It is apparent that there is demand for quality issues from bankers even at fine rates," added Kapur.
"The bank rate cut has undone all our work. Our clients are keen on reducing the coupon rates and we are restructuring the issues with an eye on the market," said a merchant banker.
However, most of them expressed the view that the private placement route is likely to remain strong despite these uncertainties. "I don't see a lot of corporates coming into the market as most of them have raised money already.
However, a large number of mid-cap corporates, public sector units, financial institutions will crowd the market," said Naval Bir Kumar, manager, west India, of ANZ Investment Banking.