Mumbai, Aug 19: Armed with a "keep well arrangement"-a guarantee from Reliance Industries Ltd (RIL)-Reliance Petroleum Ltd is making its entry into the debt market for the first time. It plans to raise Rs 100 crore (plus oversubscription) to fund its refinery at Jamnagar (Gujarat), which started production on July 15. Earlier the company had raised money through optionally fully convertible debentures. Engineering giant, Larsen & Toubro (L&T) is also entering the debt market with a Rs 100 crore bond issue. L&T will raise money through three instruments: an American option instrument, a stepped-up coupon instrument and a plain vanilla instrument.Merchant banking sources said that Reliance Petroleum is also entering the market with three instruments. It is offering a five-year instrument with a 13 per cent coupon and another maturing in six, seven and eight years at 13.25 per cent. Yet another instrument carries a maturity pattern of eight, nine and 10 years and is being offered a coupon of 13.50 per cent.The bonds are secured, but unrated.
A five-year Government of India paper is currently trading at a YTM of 10.91 per cent, while an eight year paper is trading at 11.32 per cent. The ten year paper is trading at 11.51 per cent. "The company is looking at raising long-term money to fund its project", a source said. RPL will offer 135,000 tonnes of diesel and 10,000 tonnes of kerosene in July with supplies beginning from July 20. When fully commissioned, the refinery will annually produce 24.7 million tonnes of products, operating at a crude throughout of 27 million tonnes, or 540,000 barrels per day (bpd). Parent company, RIL recently placed a four-year 10-month zero-coupon bonds at a yield of 12.90 per cent. The issue mopped up Rs 209 crore while a Rs 300 crore preference share issue still remains open.
Sources said that the bond issue is likely to sail through as it was a very rare bond issue. "The keep-well arrangement from Reliance which is a sort of guarantee from it is an added attraction forinvestors. The issue should sail through", a source said. The company is looking at banks, mutual funds and insurance companies as investors to raise money.
The L&T issue, which is expected to open tomorrow is the second time that a company is issuing an American-option bond instrument. Konkan Railways was the first company to offer such instruments to private investors. Under this, the investor can exercise the `put' option anytime during the tenure of the instrument. The stepped-up coupon instrument will offer offer a higher coupon after a year to ensure investor interest in the instrument. The last coupon is a five-year instrument which is likely to carry a coupon of 12.75 per cent to 13 per cent.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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