Indian Petrochemicals Ltd's (IPCL) book-building process has met with a positive response from investors as the issue was oversubscribed by more than Rs 150 crore thereby meeting the greenshoe option limit.
The cut-off coupon rate is expected to be finalised today, merchant bankers said.
They feel that the interest rate band of 14-14.25 would set a new benchmark in the private placement segment.
Moreover, it is expected to give an impetus for the book-building option. Market sources feel that a yield of 14.15 per cent may be fixed on the issue.
The IPCL float, which opened on June 9, was of Rs 300 crore, with another Rs 150 crore greenshoe option.
It had offered a coupon range of 14-14.25 per cent for bidders.
Rated triple A by CARE, it has a seven-year tenure and five-year put and call option.
The cut-off coupon rate will be fixed today depending on the level of commitment from the subscribers.
"We hope to close it at a lower rate," sources said. The issue, in the initial stages, had a majority of bids hovering around 14.15 per cent. Sources put the rate somewhere in that region.
The float remained in the news right from the beginning. First, there were unconfirmed reports that the petrochemical major was reconsidering the issue due to the uncertain market conditions.
And to top it all, it soughtthe book-building route to fix the cut-off coupon.
Bankers had expressed their displeasure as the offered rate was prime lending rate for most of them.
The issuers, on the othehand, expressed confidence that being a government firm, it can attract investments. from provident funds, and various trusts.
"With this the talk of interest rates shooting up in the short-term is busted. There is a lot of liquidity in the system and the credit offtake is not picking up," observed a merchant banker.
"Bankers lending money at their prime lending rate show that they are flush with funds," said another. Normally banks charge a basis point or more even for the working capital requirement.
However, investment bankers pointed out that the low cost of funds and better yields have lured bankers to the issue. A majority of them are expected to offload their stake in the secondary market within the next six months on a no-profit-no-loss basis.
