Mumbai, July 1: As many as five state electricity boards (SEBs) have entered the private placement market to collectively raise around Rs 750 crore.The Punjab State Electricity Board issue, with a rating of L-AA, opened on Monday. The Rs 150-crore issue, which has a greenshoe option of Rs 75 crore, offers a coupon of 14.75 per cent, payable half-yearly. The other firms that have entered the market are Rajasthan State Electricity Board, Gujarat Industry Power Corporation, Hyderabad State Electricity Board and Maharashtra State Electricity Board.

Hindustan Organic Chemicals Ltd, a double-A (AA) rated company, has just raised Rs 25 crore at 14.5 per cent (payable half-yearly). Reliance Industries, which boasts of a triple-A rating, mopped up Rs 200 crore last month. It, too, offered a coupon of 14.5 per cent. ``It's interest rate versus credit quality,'' one bond trader from a leading investment banking company said.

Almost all the leading banks and financial institutions like State Bank of India, Corporation Bank, IDBI, ICICI and IFCI have announced a cut in their prime lending rates following the recent cut in bank rate cut by 100 basis points to 10 per cent.

Cash-rich financial institutions like ICICI and IDBI are also said to have re-activated their term funds' marketing team. The financial institutions are approaching some of their potential clients to offer term loans at reduced interest rates, a departure from normal practice.

``Domestic financial institutions are making their term loans more attractive for corporates,'' said one bond trader. ``These simultaneous developments have forced some of the corporates to withhold their debt-raising plans till the interest rates settle down,'' he said.

However, while the low-rated (AA and lower) private sector companies have altogether stopped tapping the debt market, those with the AA+ and AAA (double A-plus and triple A) rating have deferred their debt-raising plans after the cut in bank rate last week. These companies include Finolex Cables, Ashok Leyland, Leela Venture and some of the Tata and Birla group companies.

Ashok Leyland was planning to raise around Rs 75 crore, while Leela Venture is scouting for debt funds worth Rs 130 crore.

Corporates with a AAA (triple A) rating were willing to pay around 17 per cent for a five-year debt paper six months ago. After the credit policy on April 15, the coupon on offer has come down to 14.25 per cent. Investment bankers say interest rates could come down further as credit offtake has been sluggish by and large this year.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.