MUMBAI, May 13: Multinational food giant Nestle has entered the debt market with a Rs 50 crore issue carrying a coupon of 14.50 per cent, 181 basis point higher than the coupon offered by the five-year government paper in the last auction.

The triple-A (AAA) rated company is placing a five-year paper with no call and put option. On an identical instrument, Reliance Industries Ltd offered an identical rate (payable semi-annually). The Reliance issue closed on Monday.

Money market analysts have described the Nestle paper as a test case for an multinational company in the Indian debt market. ``If it succeeds, it will set a benchmark rate for the multinationals taking exposure in Indian debt market. It may also open the floodgate for multinational debt issues as they are planning to gradually move away from bank financing,'' a market source said.

Along with Nestle, Grasim Industries, the AV Birla flagship, has also entered the debt market with a Rs 50 crore debt issue. The paper is priced at 50 basis points above the Nestle paper at 14.75 per cent. The Grasim paper also has a maturity of five years. ANZ Grindlays Bank is managing the Grasim issue.

According to merchant banking sources, a host of multinationals have lined up debt issues - among them a leading cash rich non-banking finance company. Another NBFC, Reliance Capital, is all set to tap the debt market with a issue. "The company will tap the market anytime," merchant banking sources said.

Corporates like Orient Papers have also lined up debt issues in the private placement market. Kerala State Finance Corporation has also entered the private placement market with a Rs 50 crore issue and is carrying a green shoe option of Rs 30 crore. This state finance company is offering a high of 16 per cent for its five-year paper. The yield of the paper which does not have a call and put option works out to be 16.65 per cent. The interest is payable semi annualy and the paper is repayable at par. The face value of the debt issue has been pegged at Rs 50,000. The paper is also carrying a structured obligation from the goverment of Kerala. "This is the highest that a entity is offering at current interest rate levels and this bound to be subscribed," a merchant banking source said. The issue is opening for subscription on May 15 and is managed by SBI Capital Markets and DSP Merrill Lynch. Among the financial institutions, Industrial Developement Bank of India has already set the benchmark with a 13.50 per cent bond issue which is expected to mop up Rs 1,000 crore from the market.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.