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Manju Menon
Mumbai, Nov 5: The Rural Electrification Corporation (REC) will privately place tax-free bonds worth Rs 125 crore with banks and financial institutions next week. The bond issue is the second instalment of the Rs 500 crore that the corporation has scheduled to raise in the current fiscal.
REC officials were in the city on Thursday to discuss the placement and the coupon rate of the bond issue with banks and FIs. It is learnt that the Unit Trust of India (UTI), Industrial Development Bank of India (IDBI), Development Credit Bank, HDFC Bank and ICICI Bank have evinced interest in subscribing to the issue.
According to sources, the company has received offers exceeding Rs 150 crore for its bonds which are likely to have a coupon in the band of around 8 per cent to 9 per cent.
REC had issued seven-year bonds worth Rs 100 crore only a month ago. These tax-free bonds carried a coupon of 8.7 per cent and will be compounded on a half-yearly basis.
A chunk of Rs 70-crore bonds was placed with the Global TrustBank while UTI picked up Rs 7 crore of the bonds. The remaining lot was placed with Corporation Bank, Bharat Overseas Bank, City Union Bank (a South-based private bank), Oriental Commerce Bank and IDBI.
The balance tranche of bonds worth Rs 275 crore will be issued sometime in January, said REC chairman and managing director Divakar Dev. Unlike the two tranches totalling Rs 225 crore, the bonds to be issued in January will be taxable.
According to Dev, REC is targeting those customers who have an appetite for priority sector so that the company gets the lowest coupon rate available in the market.
According to the banking guidelines, banks are supposed to grant 40 per cent of their advances to the priority sector which includes agriculture, exports and small-scale industries. Of this, 18 per cent is slotted for agriculture.
The first sale of the REC bonds will be privately placed while the subsequent sales will be available to the public, he added. REC is planning to disburse around Rs 2,000 crore inthe current fiscal. The company has also taken up various new schemes on a war-footing to enable some defaulting state electricity boards (SEBs) to repay their loans.
Various SEBs have defaulted on repayments of around Rs 2,500 crore to REC against their total outstandings of around Rs 7,800 crore.
REC reported a gross profit of Rs 120.73 crore for 1997-98. The aggregate disbursement during 1997-98 was Rs 1,093 crore as against Rs 809.69 crore in the previous year.
A new scheme of extending short-term loans to SEBs was also introduced in the last quarter of 1997-98. These were given for procurement of material required for rural electrification works to be executed by the SEBs and were payable in cash instalments within a period of 10 months.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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