The Centre has exempted the company from buyback obligation due to its massive capex pipeline.
NTPC is looking to tap the yen-denominated syndicated loan market to raise the equivalent of $300 million, a senior executive in the company has confirmed to FE.
“We are looking at a tenure of 10 years,” said the executive. This is likely to be the first time that the company is tapping the yen-denominated loan market for a 10-year loan. “We had gone for buyer’s credit earlier,” the executive explained.
The power generator had tapped the foreign currency bond market to raise 500 million euro in January 2017 via 10-year bonds at a coupon of 2.75%.
The company executive said the company will use the proceeds to fund its capex. NTPC is reportedly aiming at Rs 28,000-crore capex for the fiscal year 2018.
FE had earlier reported that the Centre has exempted the company from buyback obligation due to its massive capex pipeline. NTPC had plans to fund about 30% (Rs 8,400 crore) of planned capex in FY18 from its reserves and surplus, which stood at Rs 87,985 crore on March 31, 2017.
On May 27, 2016, the Centre had issued a capital restructuring order mandating every central PSU with a net worth above Rs 2,000 crore, and cash and bank balance of over `1,000 crore to exercise the option to buy back a portion of their shares with effect from FY17.
It is noteworthy that credit spreads for Indian firms and banks have come down significantly towards the second half of this year. Although, Japanese and south-east Asian banks are very active in the five-year syndicated loan market, 2017 saw the foreign currency bond market emerge as a tough competitor with investors willing to accept lower yields on Indian papers.
Bloomberg had reported that for the first time in 10 years, Indian firms are inclined more towards borrowing through overseas bonds than loans. Syndicated loans fell 45% in the first seven months of the year to $7.5 billion.
So far, Indian firms and banks have raised more than $11 billion via foreign currency bonds. On Monday, Exim India priced its Formosa bonds at 100 basis points over the three-month dollar Libor to raise $400 million what is likely to be the second overseas deal from India this year based on a floating rate.