The 7-year Government of India Special Bonds, 2009, floated by oil companies have evoked interest in public sector banks and are trading in the secondary repo market in the range of 6.83-84 per cent.
With more demand than supply of these bonds in the market, the spread of these bonds over central government paper is expected to fall, dealers said. The current spread between these oil bonds and government securities of similar maturity stands at 21 basis points.
The total amount of oil bonds sold in the market is to the tune of Rs 5,561 crore, following Indian Oil Company (IOC) sale of its entire holding of Rs 5,276 crore, Bharat Petroleum Corporation's Rs 135 crore and Hindustan Petroleum Corporation's (HPCL) Rs 150 crore.
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HPCL was the last among the three oil companies to liquidate part of its holdings, taking advantage of the fall in yields on government securities lately. It has sold 10 per cent of its oil bonds portfolio, worth Rs 150 crore, at a premium exceeding 50 paise per unit. The bonds have a face value of Rs 100 and a yield of 6.96 per cent, payable semi-annually, based on prevailing rates.
Senior company officials confirmed the development, but declined to reveal the name of the purchaser and the exact premium, only saying that the sale was made to a "multinational bank". The actual transfer will take place on Wednesday, they said.
Only recently, Indian Oil Corporation is understood to have sold its entire portfolio of oil bonds, worth around Rs 5,000 crore, at a discount of 34 paise per unit. Also, Bharat Petroleum Corporation is believed to have sold most of its bonds at par.
RN Sharma, general manager (treasury, payroll & reimbursement) at HPCL said, "We have been able to get a good deal because we went directly to our debenture-holding customers, and also because we only sold a small tranche from our oil bonds portfolio, worth Rs 1,481 crore."
"We wanted to test the waters with this sale. We are keeping an open mind regarding the sale of the remaining oil bonds portfolio, and are waiting for the credit policy, as a further cut in interest rates could make these bonds more attractive for investors," he added.
Oil bonds currently do not come under the approved category of investments qualifying for being included in banks' statutory liquidity ratio (SLR) ratio holdings.
The realisation from the sale of these bonds will go towards the working capital of the company, Sharma added. HPCL's working capital requirements is to the tune of Rs 1,500-2,000 crore. As HPCL is virtually a debt-free company, HPCL is in no hurry to sell their balance portfolio, he said.