Essel Infraprojects unit raises Rs680 crore via bond issue
Mumbai: A unit of Essel Infraprojects Ltd raised Rs680 crore through a rare-structured bond issue, which is supported by the monthly payments it gets from Power Grid Corp. of India Ltd’s (PGCIL) centralized transmission charge collection mechanism, according to two people aware of the development.
In its debut issue, NRSS XXXI (B) Transmission Ltd, which has set two 400 kV double circuit transmission lines, sold non-convertible debentures (NCDs) with up to 22 years of maturity. The NCDs will be repaid quarterly. Accordingly, there are 88 quarterly principal and interest repayment structures, said one of the two people cited.
“Since the company gets monthly payments from PGCIL, which is the central transmission utility, it was decided to retire bond liabilities in a staggered manner to avoid bunched-up repayments at maturity,” said the person requesting anonymity.
Such a repayment format, involving series of bonds under one structure, accommodates different investors because not all buyers have appetite for longer maturity securities, according to bond dealers. Axis Bank acted as the sole arranger for the deal.
The bonds are rated AAA(SO), the highest investment grade by India Ratings and CARE Ratings.
Structured Obligations, or SO ratings, are assigned in cases where the credit profile of the underlying security has been upgraded because of strong parentage, and are supported by a structured payment mechanism.
According to CARE, the rating on the company’s bonds takes into account its low revenue risk due to fixed payment mechanism and strong payment security since PGCIL collects and pools monthly transmission charges and then pays transmission companies.
Sterlite Power Grid Ventures Ltd was the first to issue bonds under a similar structure, where its subsidiary East North Interconnection Co. raised Rs925 crore in January 2016. Since then, two similar format bond issues are said to have taken place, according to bond dealers.
Bonds of NRSS are divided into four series, each with a different coupon rate. In the first five years, the company will pay a quarterly coupon of 7.87%, which will increase in the subsequent series. The average quarterly coupon works out to be around 8%, according to second person, a senior official of the company.
“With this bond issue, the company will repay bank loans and save up to 200 basis points annually on interest cost,” said the second person cited above, also requesting anonymity.
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