Rural Electrification Corporation plans to raise Rs 2,250 crore through a bond issue next week, two bond arrangers in talks with the company said.
The company will offer 10-year bonds and has priced them at 8.57% yield, the arrangers said. This would be lowest yield that REC will offer in three months. REC had paid 9.34% yield on the 10-year bonds it had issued in August.
Corporate bond yields have dropped sharply in tandem with the fall in government bond yields over the last three months as expectations of a rate cut by the RBI gather steam. The yield on the benchmark 10-year government bond settled at 7.91%, down 57 bps on Thursday. The yield on the AAA-rated 10-year corporate bond has dropped 70 bps in the same period.
“For AAA rated PSUs, the current secondary market rates happen to be between 8.55-8.60%,” said Ajay Manglunia, head of fixed income at Edelweiss Securities.
REC’s bond issue will be arranged by 15 banks that include SBI Capital, ICICI Securities , Axis Bank, Barclays and Nomura Securities.
The state-owned lender will use the proceeds to refinance existing debt and for current lending operations, according to one banker.