The issue, which closes on October 8, is the third one floated by MSEB to raise money for its stake in DPC. MSEB had, in December 1997 and February this year, entered the bond market with Rs 150-crore tax-free and Rs 100-crore taxable bond issues. The issues raked in Rs 270 crore and Rs 341 crore, respectively.

Though the objective of the present bond issue is to meet the shortfall in the equity portion for DPC, in the event of sufficient oversubscription the board may use it for capital expenditure and working capital requirements. The go-ahead was given by the state early this month while guaranteeing the issue. As per the government notification, the aggregate issue price of the bonds should not exceedRs 500 crore during the current fiscal.

MSEB will give the Maharashtra Power Development Corporation (MPDCL) the required amount to buy its equity in DPC while the balance will be retained by the board.

MPDCL was launched to pick up equity in DPC which is an unlimited liability company. The board, however, is not sure of the exact outgo for its stake. This will depend on the rupee-dollar exchange rate on the day MSEB signs the agreement with the company, said an official. The rapid decline in the rupee is also adding to the cost, he added.

The board has already raised Rs 611 crore from the two tax-free and taxable bond issues with the overall equity for DPC estimated to cost around Rs 800 crore. The government has permitted use of additional money for MSEB's projects.

JM Financial & Investment Consultancy Services has been the lead arranger for all the three issues and was also advisor to the board for the purchase of equity in DPC.

The present issue is a mix of taxable and tax-free bonds. The boardis targeting banks, including co-operative banks and other financial institutions, charitable and religious trusts, non-banking finance companies and insurance companies for its investment in DPC.

Under the taxable category, there are four options of different maturities, ranging from four years eleven months to 10 years with a coupon rate of 14.50 per cent per annum on all except the 10-year maturity bonds.

The second and fourth year of the 10-year tenure will have a put and call option, but the put and call value and redemption norms vary. Like previous issues, the present one is also non-convertible and guaranteed by the state government.