Sources said the company entered the market on Tuesday and is raising money at 10.60 per cent (annualised) through the floatation of a three-year paper with a call and put option after two years. The paper has been assigned a triple-A rating. Official sources declined to divulge the reason for which the funds were being raised. The holding company of the Rs 18,000-crore Tata group is a profit-making one with the privatly-held Tata Consultancy Service contributing a major portion of its profit.

Currently, the three-year paper is trading at a yield to maturity (YTM) of 11.70 per cent. At 10.60 per cent coupon, the Tata Sons paper is pegged at 110 basis points below the government security of a comparable maturity. Sources said even at this fine price, the issue will sail through.

Recently Tata Iron and Steel Company raised Rs 150 crore through the private placement route. The funds which were raised through the book-building route carried a coupon of 12.60 per cent. The debentures are redeemable at the end of the sixth, seventh and the eighth year. The Tisco paper was floated to meet the company's requirements for funding the Rs 1600 crore cold rolling mill project.

The Tata Sons paper compares well with other corporate papers of comparable maturities. While Ashok Leyland recently raised Rs 50 crore through the issue of a three-year paper at 12.25 per cent (interest payable semi-annually), Sterilite Industries also raised an identical amount through the private placement routu for three years at a coupon of 12.25 per cent (interest payable semi-annually).