Ranbaxy plans to tap bond market to raise Rs 500 crore

MUMBAI: Japanese drugmaker Daiichi Sankyo’s Indian subsidiary, Ranbaxy Laboratories, will access the Indian wholesale bond market to raise Rs 500 crore through a three-year issue.

It is yet to finalise the bankers and the coupon rate for the issue, but bankers expect it to get a good response from underwriters due to the rarity premium it is likely to command.

“People want exposure to such sectors. A majority of such pharmaceutical and FMCG companies are cash surplus, so they do not access the bond market very frequently,” said Ajay Manglunia, senior vice-president, Edelweiss Financial Services.

“Rating may not be the only criteria for pricing a bond,” he said. The bonds have been rated AA+ by rating agencies. Bankers expect the coupon to be in the range of 9.70% to 9.80%.

AAA-rated corporate papers with three-year tenure are trading at 9.43%. The yields on short-term papers have fallen by almost 30 basis points since April.

The bond issue may help the company raise funds at a lower cost, almost 30-80 basis points cheaper than bank credit. The average base rate of banks is 10% to 10.50%, according to RBI data.

A section of brokers, however, feels the response to the issue may not be overwhelming. “Just because you are not a frequent borrower does not mean you would get a robust pricing.

The last few quarters have been difficult for them (Ranbaxy) in terms of their earnings,” said a senior official from a private sector bank, requesting anonymity.

Ranbaxy Laboratories had posted losses of Rs 586 crore in the second quarter of the calendar year.