MSEB, which has an option to retain the entire oversubscription, hopes to raise Rs 500 crore. Industry experts, however, believe that the issue may not attract enough investors to meet MSEB's expectations.

Another reason to rake in as much as possible is the uncertainty of DPC's 30 per cent equity cost for which the issue was planned. This is the third time MSEB has entered the bond market to raise money for this purpose as the expected outgo for the purchase of equity has been growing thanks to a weakening rupee.

MSEB will purchase the equity from Enron Mauritius Company, the investment company of Enron International. The board also has to share theburden of project cost escalations due to a delay in finalising the project.

MSEB has already raised Rs 611 crore from the earlier two bond issues, which included Rs 150-crore tax-free and Rs 100-crore taxable bond issues. Each of these raked in Rs 270 crore and Rs 341 crore respectively. The lead arranger for all the three was JM Financial & Investment Consultancy Services which was also advisor to the board for buying equity in DPC.

The ongoing issue is a mix of taxable and tax-free bonds. Under the taxable category, there are four options of different maturity, ranging from four years, 11 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 of 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 is guaranteed by the state government. Priced at Rs 1 lakh per bond, the issue bears a credit rating of LAA (SO) byICRA.

The tax-free regular income bonds have two options of five- and ten-year tenures and the latter will have the call and put option. The proceeds from the privately placed issue will be used by the Maharashtra Power Development Corporation Limited (MPCL), the newly formed company to pick up a stake in DPC.