The placement of bonds with a maturity period of 10 years will be with commercial banks and financial institutions as they have shown keen interest in the issue which is expected to hit the market this week.

The interest rates would be decided through book building exercise.

The funds would be deployed to expedite activites under its Hudco Niwas scheme launched in March this year.

Hudco's sanctions under the scheme stand at Rs 19.36 crore till June 30, the Hudco's director finance, S Sundreshan said.

Earlier, the public sector undertaking had plans to mop up Rs 500 crore through tax-free and taxable bonds during the current fiscal but programme was shelved after (Crisil) downgraded the rating of the corporation in May AA to AA-and the government denied permission for flotation of tax-free bonds.

The rating reflected negative outlook on Hudco's asset quality onaccount of deteriorating fiscal profile of the state governments and inherently weak finances of most of the borrowers, the sources in the corporation pointed out.

The rating also factored in the low profitability of Hudco's operations, high gearing and low interest coverage. These factors also offset by ownership of and the continued support from government, as evidenced by increased equity infusion and fiscal concessions, the sources added.

The corporation's total assistance towards infrastructure and housing projects during 1998-99 more than doubled to touch Rs 6,666.67 crore up from the previous Rs 3,061.8 crore in the previous year.

Hudco has also clocked a 105.43 per cent increase in its financing for urban infrastructure projects with its total financing for projects having risen to Rs 2,649.75 crore for the financial year ended March 31, 1999.

The Centre had earlier raised its authorised capital in the corporation to Rs 1,250 crore from Rs 385 crore during 1998-99, it provided an additionalequity of Rs 192 crore with another 321 crore earmarked for the year 1999-2000.