Bharat Petroleum Corporation Ltd (BPCL) is using the book-building route to raise Rs 200 crore in the private placement bond market carrying interest of 15.5 per cent.
The debt market has seen the long- and medium-dated government securities register a dip in their yields as prices have been rising.
This has brought them in alignment with the yield curve, an adjustment process which bankers feel is due.
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Papers maturing in three years are being traded at yields of 13.3 per cent; papers maturing in five years are trading at little over 13 per cent; nine year papers are trading at 13.33 per cent.
This trend has been carried over to the corporate debt market also given that the corporate yield curve tracks the government yield curve.
The recent Mahanagar Telephone Nigam Ltd bonds which were also privately placed offered a yield of 15 per cent for a five year paper.
The currently open five-year issue of Power Grid is offering an yield of 15.75 per cent (with upfront discount).
Prior to that the private placements of Industrial Development Bank of India (IDBI) and the Industrial Credit and Investment Corporation of India (ICICI) and Industrial Finance Corporation of India (IFCI) offered effective yields between 16.25 and 16.75 per cent.
This was reflective of the conditions in the money market where a sentiment of uncertainty regarding liquidity and yields prevailed.
The company's issue is to open on February 26 and close on March 6. Allotment is to be done on March 10 according to the book building mechanism. Tenders will be invited and a book will be maintained. Allotment will be on a first come first served basis subject to the size of subscription.
Market players feel that the issue will be well picked up as there is sufficient liquidity in the system. Moreover, the rating of the company is high.