Oil PSUs find no takers for Rs 11.5k crore special bonds

New Delhi, July 26 | Updated: Jul 27 2006, 05:30am hrs
Oil marketing companies are stuck with Rs 11,500 crore worth special bonds issued by the government with virtually no takers for them in the secondary market. The bonds were issued to Indian Oil, HPCL and BPCL to compensate them for the losses in retailing LPG and kerosene in the domestic market at subsidised rates.

The countrys largest oil refining and marketing firm, Indian Oil Corporation, has on July 19 written to the petroleum ministry that it was not able to liquidate these bonds to meet its fund requirement. The ministry has, in turn, asked the finance ministry to make these bonds attractive enough for subscription by banks,FIs and provident fund trustees.

According to IOC, the investor appetite for these bonds is very low and despite consistent efforts investors are not quoting at all for these bonds. Pending liquidation of these bonds, it has had to resort to borrowings at higher cost, impinging on its bottomline.

Banks and FIs cannot consider investment in oil bonds as part of their statutory liquidity requirement (SLR). Further, these bonds do not qualify for refinance from the Reserve Bank of India under the liquidity adjustment facility too, making them very unattractive as an instrument.

The 50-bps hike in short-term interest rate during the last two months has further led to a wide gap between the yield on oil bonds and present yield on government securities.

IOC said the demand for its 7.61% special bonds 2015 was very low, and at a huge discount. For its three-year 7.33% bonds, it was better, but still at a discount.