The government-owned Gas Authority of India (GAIL) has mopped up Rs 500 crore through ten-year bonds paying a coupon of 8.80% as systemic interest rates threaten to move up further.
?The company may have been looking for a finer pricing which is probably why it chose to retain just Rs 500 crore of the amount of over Rs 1,500 crore that the issue attracted,? said a merchant banker.
A couple of large private sector banks including ICICI Bank (100 crore) and Axis Bank (Rs 50 crore) are understood to have participated in the issue. GAIL is hitting the market after four years. The yield to maturity on similar AAA bonds in the secondary market range between 8.94-8.95%, dealers point out, adding that Power Finance Corporation is offering a coupon of 9.05%, to raise around Rs 150 crore by selling 20-year bonds, which are strippable at the end of 10, 15 and 20 years. The issue is understand to have received good response on Wednesday, arrangers said.
Last Friday IRFC collected Rs 1,300 crore through tax-free bonds, on which the pre-tax annualised yield works out to 9.27% for a 5-year tenure, 9.68% for 7-year tenure and 10.30% for a 10-year tenure for banks and corporates paying tax at the rate of 33.66%.
GAIL?s taxable ten-year secured bond issue has a tenure of 10 years with a call option at the end of seventh year. Limits to buy Rs 28,600 crore worth of corporate bonds to FIIs have been almost entirely bid for. This follows a move by the government to deepen the debt market and allow infrastructure firms and the government to access additional foreign capital to the extent of $5 billion each.