Bharat Petroleum Corporation Ltd (BPCL) is set to hit the corporate debt market with a Rs 500 crore secured non-convertible debenture issue on Monday. Merchant bankers said, although the company has earlier postponed the issue, it has now reconsidered to launch it.
With a notified amount of Rs 250 crore and a greenshoe option of another Rs 250 crore, the issue has a maturity period of 7 years with put and call options to be availed after 5 years.
The issue offers a book-building route with a coupon rate in the band of 9.85-10.35 per cent. The coupon rate, to be paid annually, will be 60-65 basis points higher than the yield of a government security of 7-year maturity.
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The lead arrangers of the issue are ABN Amro Securities India Pvt Ltd, DSP Merrill Lynch Ltd, ICICI Securities and Finance Company Ltd, Kotak Mahindra Capital Company and SBI Capital Markets Ltd.
Crisil has given AAA rating to the issue indicating highest safety on timely payment of interest and principal.
Merchant bankers feel that the issue will encourage the corporates who have been waiting for the Reserve Bank of India (RBI) to cut the rate to float their papers.
A corporate bond dealer with a merchant bank said, "A major part of the impact of bank rate cut has already been discounted in the market. Moreover, from the frequent auctions of government securities, it seems that the RBI is not likely to leave much space for the corporate bonds and hence the market feels that there is no point in waiting for the bank rate cut."
The spread between the government securities and the corporate bonds with similar maturities has come down sharply from 1.25 percentage point in the beginning of the financial year to 75 basis points now.