Gridco Launches Rs 100cr Bonds

The Grid Corporation of Orissa (Gridco) yesterday launched a Rs 100-crore bond issue to raise funds to invest in transmission & distribution projects and meet long-term working capital requirements.

The bond with a coupon rate of 15 per cent is only private placement with various banks, pension funds and other financial institutions. The company has the option to retain oversubscription up to Rs 200 crore, said the Gridcos finance director R B Mishra.

Gridco had planned to launch a Rs 300-crore bond in July last year to raise money in a phased manner over a period of one year in keeping with investment needs. However, uncertain market conditions not only forced the company to delay the issue of bonds but also influenced its decision to raise the money at one go, he said.

 

He said the greenshoe option of the present instrument would enable the company to raise Rs 300 crore from the market as intended earlier.

The minimum denomination of the bond, which has a tenor of seven years, has been fixed at Rs 1 lakh and could be redeemed at the rate of 30 per cent each at the end of the fifth and sixth years and the balance 40 per cent at the end of seventh year.

Mishra said that to help investors repose faith in the instrument, it was backed by the state governments full guarantee with an escrow mechanism to ensure timely payment of interests and principal.

Calcutta-based SBI Caps, RR Financial Cosultants and Apple Finance of Chennai are the managers to the issue.

Mishra said the World Bank and the UKs Overseas Development Agency (ODA) had together funded $460 million to upgrade and strengthen the transmission & distribution network in the state following power sector reforms. The money raised from the bond launched yesterday would mainly be used to meet Gridcos share of investment in these projects.

Gridco has projected an investment of Rs 3,000 crore in transmission & distribution projects over the next five years. Of this, roughly Rs 1,500 crore will come from the World Bank and ODA. The balance, Mishra said will be met through loans from the Power Finance Corporation and Rural Electrification Corporation (REC) to the tune of Rs 300 crore, bond issue (Rs 300 crore) and Gridcos internal accruals and other borrowings (Rs 900 crore).

The focus of ongoing power sector reforms in the state is on reducing the transmission & distribution losses to about 20.4 per cent by the year 2002 from the present high of 47 per cent, he said.