Rural Electrification Corporation (REC) plans to raise Rs 1,000 crore by issuing tax-saving infrastructure bonds in the current financial year. The first tranche of the bond issuance is expected in the last week of November.
REC has decided to issue the infrastructure bonds in a phased manner to avoid the risk of a poor response, given the current market scenario. “We will come out with issues worth nearly Rs 300 crore each, in tranches. We are not going to issue them in one shot because of the lukewarm response in the debt market,” H D Khunteta, chairman and managing director, REC, told Business Standard.
The second tranche of bonds is likely to be issued in the last week of January, the chairman said. While the coupon rate on the benchmark 10-year government bond is 7.8 per cent, the 10-year infrastructure bonds are likely to be issued at a higher coupon rate. “The coupon on these bonds would be around 8.25-8.4 per cent,” Khunteta said.
According to norms, the coupon rate of tax-savings infrastructure bonds cannot be more than the closing yield on the 10-year benchmark government security of the previous month. The provider of loans to power projects aims to raise up to Rs 30,000 crore this financial year and has borrowed about Rs 15,000 crore locally till now, most of it coming through bonds.
The company plans to borrow at least $2.5 billion abroad this financial year, including $1 billion through the sale of convertible bonds, and the rest through syndicated loans.
The company also had plans to raise $300 million through Swiss francs in October, which had been deferred to the end of November, due to uncertain market conditions, Khunteta said.