Low-Rated Firms On Top Guns Trail To Tap Debt Funds

After the success of top-rated corporates in the bond market, others with lower ratings are entering the market to raise debt funds. Among these corporates are Mahindra and Mahindra, IPCL, and state-owned enterprises like the Rajasthan State Electricity Board (RSEB) and the Krishan Bhagya Jala Nigam (KJBN).

Because of their slightly inferior rating these companies are having to pay a spread over the 14.50 per cent coupons being paid by the AAA corporates.

Mahindra and Mahindra is in the market to raise Rs 50 crore with an option to keep the oversubscription through five-year bonds with a three-year put option for investors at a semi-annual coupon rate of 14.75 per cent. The company has been rated AA+.

 

Merchant bankers say that the tractor major should have little difficulty in sourcing funds for three years at 14.75 per cent, considering that AAA companies like ACC and Reliance Industries have just finished placing bonds at a coupon of 14.50 per cent

The two state-owned enterprises, RSEB and KJBN, have been rated A+(SO). The structured obligation is because of a guarantee from the respective state governments of Rajsthan and Karnataka.

While RSEB is in the market to sell bonds worth Rs 500 crore at a coupon of 15.10 per cent, KJBN, the Karnataka water company, is planning to sell bonds worth RS 300 crore at a coupon of 15.75 per cent. While the RSEB bonds will be redeemed in the fifth, sixth and seventh year, the KJBN bonds are for a tenure of five years.

Other AA+ firms to have raised money include Nicholas Piramal which has raised Rs 50 crore for five years at a cost of 15.25 per cent and Ashok Leyland Finance which is raising Rs 25 crore at a price of 16.75. Anagram, with a AA rating, is trying to raise Rs 50 crore at a 16 per cent coupon.

Bankers expect further down-sizing of yield expectations among investors next week when IPCL's Rs 450-crore bonds issue opens. The issue is being placed on a Dutch-auction basis and the company has indicated a yield band between 13.75 and 14.25 per cent.

Kotak Mahindra officials expect the issue to be fully subscribed at a coupon of about 14 per cent.