Power Grid raises Rs 3,000 crore by selling bonds
The triple-A rated company decided to raise funds following softening of the benchmark rate with banks jumping to buy bonds. India's largest lender
SBI is said to have bought Rs 564 crore through its arm SBI Capital Markets, three people familiar with the matter told the Economic Times. Bonds offered 8.40%, which was about 55 basis points higher than the sovereign benchmark security.
A basis point is one hundredth of a percentage point. Strip bonds are those where investors are supposed to buy all securities with maturities up to 15 years at a uniform rate.
Ahead of the Reserve Bank of India's June bi-monthly credit policy, markets are mostly expecting a 25-50 bps rate cut, which means bond yields would fall further pushing up prices.
Banks can then sell their holdings in the secondary market for a profit, said one of the persons cited above.
There were about 18 arrangers for the PGC issue. During mid-May, the 10-year benchmark bond yields rose to a high of 7.96% as prices fell. Accordingly, bond sellers shied away from the market as investors demanded higher rates after the yield spiked from 7.68% earlier in March. The benchmark yield is now hovering at its past level.
PGC had last issued long-term bonds three months ago raising Rs 435 crore at an yield of 8.30%. Some frequent issuers include Exim Bank, Power Finance Corporation and
Steel Authority of India ( SAIL) and GIC