MUMBAI: National Hydro Power Corporation (NHPC) is raising up to Rs 2,000 crore in a bond sale, as it braces for a large capacity expansion plan amid the government’s thrust on hydroelectric energy.
The bonds will have a 15-year tenor and are likely to be priced in the range of 6.7-7.10%, market sources said. They will likely open for subscription on Wednesday.
“Being a sovereign-backed entity, we are raising resources at the cheapest rate in the power sector,” said HS Puri, CGM-Finance at NHPC, the public sector undertaking under the Ministry of Power. “It is a part of our capex plan, which is expanding now.”
The company plans to deploy the money either in new or ongoing projects across India. Its capex plan is estimated at about Rs 8,000 crore in the next financial year, which would be nearly 50% higher than in the current fiscal year.
The spread, or differential, between benchmark bond yields and top-rated corporate paper is now at about 90 basis points, compared to 60 basis points a month ago. Benchmark yields were at around 6.07% on Tuesday.
“Companies are rushing to tap the benign low interest rates amid signs of rising yields,” said Ajay Manglunia, managing director – fixed income at JM Financial. “Government-backed companies are now requiring the money most as a huge capex plan is unfolding for them.”
NHPC should see its interest rates limited to 6.75-7.10% range, he added.
In April last year, the company raised Rs 750 crore on 10-year tenor paper offering 6.8%, Manglunia said.
While NHPC raises bonds to fund projects, it infuses equity capital in various subsidiary companies spread across Jammu & Kashmir, Madhya Pradesh and Sikkim.
Last month, the Indian Renewable Energy Development Agency signed a Memorandum of Understanding with NHPC seeking its technical expertise in developing renewable energy projects.