Reliance In Bid To Raise Rs 50 Cr Through Commercial Paper

Banking industry sources opine that the issue is likely to sail through smoothly mainly because of the long list of company bankers. Insurance companies have shown keen interest in CP issues of major corporates.

Reliance Industries has entered the market for raising funds through the commercial paper (CP) route with maturities ranging between one to six months. The quantum of requirement is estimated to be in the region of Rs 50 crore.

The rates, which the company is eyeing, are believed to be finer than rates at which firms in a similar rating have raised in recent times.

The rates offered to bankers are in the range of 7 to 7.25 per cent for 1-month maturity and 10 per cent for 6-month maturity paper. The company has received the highest rating for the issue.

 

This is RILs first CP issue in the post-credit policy scenario in which corporates were given full freedom to fund their working capital requirements. Reliance has already set the benchmark by raising about Rs 100 crore at 14.5 per cent through a 5-year paper. Banking industry sources opine that the issue is likely to sailthrough smoothly mainly because of the long list of company bankers. Insurance companies have shown keen interest in CP issues of major corporates.

Larsen & Toubro had also come out with 364-day and a 270-day commercial paper. L&T has indicated a yield of 11.75 per cent on maturity of 364-day CPs.

The company is also in the process of issuing 270-day commercial papers. The rate on this maturity paper is 11.25 per cent. It is expected to help the formation of a yield curve for highly rated companies. At present, the cut-off on a 364-day Government of India treasury bill gives a yield of 8.98 per cent and with this issue the risk premium for a 364-day paper is now placed at 275 basis points. There is no benchmark for 270 days after the 270-day GoI treasury bills were withdrawn.