Larsen and Toubro (L&T) is looking to raise R6,000 crore through non-convertible debentures (NCDs) via private placements, and will get the necessary shareholders’ approvals, the company said in a notice to the National Stock Exchange (NSE) on Tuesday.
The NCDs could be across tenures and the funds are expected to be raised over a year as and when the company needs the money.
The AAA-rated L&T’s standalone gross debt stood at R11,500 crore at the end of March 2014, while the net debt was R7,000 crore.
Market watchers believe there will be enough takers for the paper.
Ajay Manglunia, senior vice-president for fixed income at Edelweiss Securities, points out that there has not been too much supply from the engineering and construction company.
“L&T may offer a coupon rate of somewhere between 9-9.10% for a 10-year NCD and mutual funds, insurance companies and banks could be buyers,” he said.
The yield on the 10-year benchmark bond is 8.57% and L&T is likely to offer 50 basis points more,” he added.
Nipa Sheth, director of brokerage firm Trust Group feels the company may issue five-year bonds.
Reliance Jio Infocomm, the telecom arm of Reliance Industries, earlier this week raised R1,000 crore through its NCD issue which was priced at 9.25% and the tenor of these papers was 10 years, Sheth told FE.
L&T’s corporate bond issuance will be the largest private placement by a corporate entity in the financial year 2014-15.
The corporate bond market is set to heat up and companies are looking to issue more papers through private placements following a period of lull in the month of April because of the debenture redemption reserve clause in the Companies Act.
In April, debt private placements dried up to R8,230 crore, a fall of nearly 70% year-on-year according to information from Prime Database.
Since then, the ministry of corporate affairs had clarified last month that it was exempting non-banking finance companies (NBFCs) from maintaining a 50% debenture redemption ratio in the last one year ahead of maturity.
Unlisted corporate entities, however, need to maintain a debenture redemption ratio of 25% one year prior to maturity.