NTPC to raise Rs 3,000 crore through a 3-year bond issue
According to persons familiar with the situation, the state-owned power generator NTPC plans to issue three-year bonds worth up to 3,000 crores this week. According to them, the issuance will have a basic size of 500 crores and a green shoe option of 2,500 crores.
The monies will most likely be used for capital expenditures and loan refinancing. The bond offering would be NTPC’s first in the current fiscal year, and experts anticipate significant demand, as is customary. It is expected to end on April 17. The bonds will mature on April 17, 2026. The bonds are expected to be rated AAA by rating agencies Crisil, ICRA, and India Ratings.
“The EBP (NSE’s electronic debt bidding platform) bidding for NTPC is likely from 10 am to 11 am on Wednesday (April 12),” one of the sources said. “The requirement for these three-year papers issued by NTPC is very specific among investors and the supply is low because NTPC does not issue three-year bonds often.” The person expects the cut-off yield for the bonds to be 7.5% or lower. “REC’s bonds are currently around 7.50%. We wouldn’t be surprised if the cut-off (yield) for NTPC’s bonds would be around similar levels or lower,” the person said. “In the current environment, bond yields are falling and there is space for short-term yields to fall more.”
REC is a government-owned electricity finance corporation. NTPC last used the bond market in December, when it sold 500 crores in ten-year bonds. Following the surprising decision by the Reserve Bank of India not to raise interest rates at its policy review last week, yields on government bonds have fallen, with short-term bond yields falling particularly sharply. Bond prices and yields move in opposite directions. Short-maturity bonds are very susceptible to changes in interest rates and banking system liquidity.
Given that government securities are used to price corporate debt, a drop in sovereign bond rates makes it cheaper for companies to issue debt. Furthermore, a considerable part of corporate debt is issued in bonds with maturities ranging from three to five years.
Since the Reserve Bank of India’s policy statement on April 6, five-year government bond rates have fallen by as much as 16 basis points, falling below the psychologically critical 7% level for the first time in seven months. Tuesday, April 11, 2023
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