After Oil and Natural Gas Corporation (ONGC), government-controlled Hindustan Petroleum Corporation Ltd (HPCL) has set the ball rolling for tapping the overseas bond market. The oil marketing company (OMC) plans to raise around $350 million this year.
The company is already in the process of raising $400 million in external commercial borrowings (ECB). A senior company executive told Business Standard that after closing the ECB, the firm will go in for bonds. “The Reserve Bank of India (RBI) allows companies to raise $750 million overseas under the automatic route. After raising ECBs, the remaining sum will be raised through bond.”
At the current rates, foreign funds are around 200 basis points cheaper than domestic funds.
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Although the market sentiment has improved for government-owned companies, OMCs such as HPCL are heavily dependent on borrowings due to the subsidy burden they carry for selling diesel and cooking fuels below market price.
“We are getting ratings in preparation for the borrowing programme,” said the HPCL executive. HPCL’s marketing peer Bharat Petroleum Corporation Ltd (BPCL) had in October raised $500 million.
Unlike the OMCs, ONGC does not have any pressing need to raise money. However,. its overseas arm ONGC Videsh is likely to raise around $900 million in the overseas bond in January 2013. The first-ever bond issue from the company is aimed at testing the overseas money market for a company that has drawn huge capex plan, and has largely been dependent on its parent for funding acquisitions.
ONGC has hired Citigroup, RBS and Standard Chartered to rate the bond sale. Proceeds would be used to fund an acquisition of a stake in Azerbaijan oilfields. Of the $900 million the company is planning to raise, $750 million can be borrowed under the automatic approval route. For the balance, however, the company will have to seek the permission of the RBI.
