According to PNB Capital Markets, the sole arrangers of the issue, banks have picked up Rs 314 crore of the Rs 500-crore issue. Financial institutions have put in Rs 109 crore, while the PF trust and individuals have invested Rs 65 crore and Rs 12 crore respectively.

TNEB is one of the few well-managed electricity boards in the country. This should have given investing organisations a little more comfort. The bond issue is guaranteed by the government of Tamil Nadu and has an escrow mechanism to ensure prompt payment of interest and repayment of principle. The bonds are for a seven-year period with a staggered redemption from the end of the fifthyear.

The coupon rate is 13.15 per cent (annualised yield of 13.58 per cent) and the investment enjoy's a lower weightage for the purpose of calculating the capital adequacy ratio. The rate is attractive considering the fact that interest rates are likely to look downwards and there is already talk of a cut in cash-credit ratio which would invariably result in a cut in the prime lending rate.

The proceeds of the issue is being used to improve the transmission and distribution network. This is the second time TNEB's bond issue is getting an overwhelming response. It maiden foray into the retail bond market last year met with a huge success by raising Rs 300 crore as against the original issue size of Rs 200 crore (including a greenshoe option of Rs 100 crore).