Nhai Mandate For 3 Banks
The National Highways Authority of India has engaged three merchant bankers - ICICI Securities, Kotak Mahindra and a consortium of IDFC-DSP Merrill Lynch - for executing its market borrowings programmes in the current financial year.
One senior NHAI official told Business Standard the authority would raise Rs 500 crore through issue of bonds in the current fiscal. These three merchant bankers did a presentation before the authority and initiated action to launch the bonds during August-September. They would be working as a team, the official said.
According to the official, the bonds will be issued for private placement and on tap basis. NHAI has selected these three institutions out of five bids including SBI Caps and G M Morgan.
The bond issue will offer benefits available under Section 54 EC of Income Tax Act which would be notified soon.
NHAI will pay an arranger fee of 0.12 per cent of the amount mobilised and retained by NHAI. The amount will be shared equally among the arrangers. The fee will also include advice for future bond issue in the current financial year.
In the presentation, the bankers explained before the authority about the benefits under Section 54 EC of the IT Act for different categories of investors and cost advantage to NHAI from this section. They also suggested a coupon rate which would be reviewed at the time of offer.
The three merchant bankers will also take care of the procedures for entering into agreement with NSDL for keeping the bond in the dematerialised form.
The bankers will also chalk out a publicity campaign for the issue and a day-to-day schedule for all activities. NHAI will launch brand building exercise via road shows and press conferences in major financial cities.
The bankers will also put forward suggestion for the tenor of bonds, keeping in mind the lock-in period of three years under Section 54EC of IT Act vis-a-vis NHAI's requirement of fund for a longer period. They may work out some alternative models explaining the advantages and disadvantages in relation to the cost to NHAI.
NHAI pointed out that flexibility was required to safeguard the interest of NHAI against a sharp fall in the interest rate in future.
The market borrowings would finance around 20 per cent of the Rs 60,000 crore National Highway Development Project (with connectivity to ports), comprising golden quadrilateral and Prime Minister Atal Bihari Vajpayee's north-south and east-west corridor.
The borrowings would be made in two parts _ bonds and project specific borrowings.