ABN Amro and Citibank have pitched together for lead managing this issue. A detailed presentation on jointly managing this issue was made by the two banks before NTPC's top brass on Thursday.

The proposed bond issue of NTPC will be done through the credit enhancement route, with a guarantee from a leading bank. This will ensure a higher rating to the company's issue which will translate into a lower issue cost.

Top banking sources disclosed that NTPC is looking at an euro bond of seven-year maturity with a put option of five years. Despite India's low sovereign rating of BB, the credit enhancement route will get NTPC a higher rating for its bond issue, thereby helping it price this issue at a lowerrate.

Whereas, this route will help NTPC get finer rates for its issue, it will also result in a higher outgo to the banks, guaranting the issue. NTPC, sources said, is currently engaged in negotiating this guarantee fee along with other costs, with these overseas banks.

Another presentation on handling this issue was also made by CS First Boston on Thursday while Bank of America has been asked to make its offer to NTPC on Friday, sources added.

The current spread for a similar issue in the euro market is 450-600 basis points above the US treasury. As a result of higher rating through credit enhancement, NTPC's issue is expected to quote in a narrower range.

NTPC has also written to the finance ministry for its approval on going with this issue. However, sources said that NTPC has not decided on the timing of this issue and is unlikely to come with out with it during the current financial year.

Following the selection of the lead managers for this issue, NTPC will start with the exercise ofconducting road shows. Being its first bond issue in the international market, NTPC has decided to test the market starting with $100 million only.

Depending on the success of this issue, NTPC will decide on its future course of action of tapping the overseas market in a big way, sources said.

NTPC, which has chalked out plans to become a 30,000mw-plus company by end-2007, need funds to the tune of Rs 36,000 crore for its new projects along with expansions in the existing ones. Tapping the euro market with big issues in the future is also part of NTPC's future financial strategy.