Hindalco To Float Rs 100-Cr Issue Via Book-Building

Hindalco Ltd, part of the Aditya Birla group of companies, is all set to tap the market for raising Rs 100 crore via the book-building route. It will be the first private sector undertaking to opt for book building.

With a tenor of seven years, the corporate plans to raise the funds at a rate between 13 per cent to 13.5 per cent, which is below the prime lending rate of the State Bank of India (SBI) which is 13.5 per cent.

If successful, this will be the finest rate on a long-term debt paper issued by a AAA rated private sector corporate making it a benchmark rate.

The paper, which is a non-convertible debenture (NCD), has an issue size of Rs 75 crore with a greenshoe option of Rs 25 crore.

The lead arrangers and book-keepers to the issue are Birla Global Finance Ltd and DSP Merill Lynch. The issue opens today and is set for a run of 10 days.

Hindalco has obtained an AAA rating by Crisil. However, being a private sector undertaking, it is offering a rate that is a whole percentage point higher than that of Hudco, which had a credit rating of AA and set its indicative interest rate at 12-12.5 per cent band.

Hudco, being a public sector undertaking, enjoys a better status. Hence it is in a position to offer a lower interest rate, despite its lower rating, sources said.

The issue, while it does not carry a put and call option, will be repaid in the fifth, sixth and seventh year.

According to sources, In our talks with various banks we have found substantial interest in this paper as it offers the most decent coupon available.

The arrangers are expecting the issue to do well, with probably an oversubscription.

Merchant banking sources strongly expect rates in the banking system to come down further by at least another 50-basis points. Hence, coupons on debt paper could see further softening. With this view, the market feels that the paper will be well subscribed.