After two public sector companies failed to raise funds from the bond market earlier this week, India Infrastructure Finance Company (IIFCL) beat the gloom with its private placement of bonds on Wednesday.
IIFCL, which is allowed to raise R10,000 crore through tax-free bonds, raised Rs 632 crore via private placement of these bonds. It was offering bonds in three tenures of 10 years at 7.75%, 15-years at 8.26% and 20-years at a coupon of 8.19%. The infrastructure finance company had Rs 100 crore of bonds on offer with an oversubscription option of Rs 2,500 crore. An IIFCL executive said there were more than 30 institutional buyers among which trusts were the biggest buyers with purchases of over R40-50 crore each. Companies and mutual funds were also among the buyers but there were not a single bank that participated in the buying these bonds.
Earlier this week, Power Finance Corp (PFC) and Rural Electrification Corp (REC) cancelled private placement of their bond issues due to lack of interest from investors who were seeking higher coupon payments that companies were unwilling to accept.
PFC had planned to raise Rs 150 crore with an option to retail oversubscription of up to R1,500 crore and had offered the same rate as IIFCL, but investors at that stage were seeking higher coupon rates due to the prevailing high yields earlier in the week.
Consequently, PFC had no subscription and had to cancel their offering. Similarly, REC through taxable bond had planned to raise R150 crore with an unspecified greenshoe option but did not open the book as investors were expecting a coupon of at least 10.7%.
On Tuesday night, RBI had announced it would buy R8,000 crore in longer dated securities which helped bring down long term yields. In the current financial year, the government has allowed 13 public sector institutions to raise R48,000 crore through tax-free bonds in 2013-14 to meet their infrastructure investment needs and said that 30% of Rs 48,000 crore can be raised through private placement.
