Cos may tap bond market to beat credit squeeze

MUMBAI: India's largest-private sector company Reliance Industries (RIL) is expected to raise over Rs 12,000 crore through bonds to meet its funding requirements, arrangers to the offering said. The fund-raising plans far exceed the company���s earlier estimates. This is the first time in the past few years that the company has attempted to raise such huge funds through the debt route.

Reliance is one of the many marquee corporate houses that are expected to tap the local bond market in the wake of difficult global markets and restricted access to bank finance. Indian companies are expected to raise over Rs 25,000 crore in the next couple of months through bonds and loans. Grasim, Hindalco, Aditya Birla Novo, Sterlite Industries, Balco,

ACC, Apollo Tyres, Adlabs, JK Cement, JSW and some Tata entities are planning to tap the bond markets, according to bankers. An email questionnaire to RIL did not elicit any response until late Wednesday vening.

���Raising funds through the bonds route is proving much cheaper than taking term and working capital loans from banks,��� according to a primary dealer. ���The reducing corporate spreads (the yield premium over sovereign bonds shrinking) is also aiding the sentiment,��� he added.

Other primary dealers point out that despite the fears of drying liquidity, fresh money is expected to flow into the market soon. Cash-rich LIC and provident fund managers are looking to invest in debt offerings. Profit booking by traders could also translate into continued appetite for corporate bonds, dealers say.

Of the proposed issuance of Rs 12,000 crore, RIL raised Rs 5,000 crore through the sale of non-convertible debentures to LIC and mezzanine debt. Moreover, the company garnered Rs 2,000 crore through 5-year bonds at a coupon rate of 11.45% a couple of weeks ago.



Last week, Reliance sold 10-year bonds worth Rs 500 crore at 10.75%. It is expected to raise Rs 500 crore this week through 3-year bonds at 10.10%. The company still has a window of raising Rs 4,000 crore in coming weeks.

Reliance is among the many companies looking at fulfilling high-cost short-term liabilities through cheaper long-term debt borrowings (bonds). ���With fears that liquidity could vanish any moment, companies are looking to make the best of the comfortable liquidity conditions to raise reserves,��� a banker said. No company wants to get stuck in the scenario prevalent a couple of months ago, the banker said.