Power Grid plans to raise Rs 10,000 cr in FY13 via bonds

Saikat Das
Moneycontrol.com

State-owned Power Grid Corporation of India (PGC) is planning to mop up Rs 10,000 crore 2012-13 through private placement of bonds as against Rs 8,500 crore raised in 2011-12. The first tranche of bond issue is likely to hit the market in June. According to R T Agarwal, Director (Finance), of the company, it will continue to raise cheap funds to meet its quarterly business requirement.

"We don’t raise money for full year. We do it in tranches to meet our requirement for two-three months. In June, we would raise around Rs 2,000-2,500 crore approximately. We have not yet appointed investment bankers. We will finalize every thing after holding meetings with them," he told Moneycontrol.com on the sidelines of a conference.

In its last tranche in FY12, PGC had offered interest rates in the range of 9.3-9.5% for different tenures. As a standard practice, PGC generally proposes coupon rate, which is 50 – 60 basis points higher than the existing 10-year government bond yield. Currently, the yield on 10 year g-sec is hovering around 8.50%.

Interestingly, as a navratna status public sector unit PGC does not offer any commission to investment bankers for selling their bonds. However, companies like Power Finance Company or Rural Electrification Corporation who are very active in the bond market offer 0.07-0.10% (of total mobilization) as commission.

However, many merchant bankers do it for the sake of getting ranked among the top arrangers in the country. This normally helps them to expand their issue-building business. "Arranging bond issue of a navratna status company always enhances your brand," quipped a Mumbai-based investment banker.

Meanwhile, PGC does not seem to be keen in mobilise resources through external commercial borrowing due to rupee's free fall against the US dollar.

"We avail a fund raising route depending on its cost. ECBs include forex rate variations. ECB funds will be cheaper no doubt but after converting the same into rupee, it will be costlier. Our income is in rupee (term). We have to have limited exposure in ECBs," Agarwal said.

Also read: Power Grid plans 20k cr capex, to expand overseas

PGC is the engaged into wheeling of power and owns transmission network of about 93,000 circuit km transmission lines. As on date, it transmits 50% of total power generated in India.

saikat.das@network18online.com