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Stock Analysis, IPO, Mutual Funds, Bonds & More

Sterlite to raise 2,500 crore via 10-year bonds

"The bonds should go through without much trouble," said one of the three arrangers of the issue, who didn't wish to be named.

, ET Bureau|
Apr 01, 2013, 04.01 AM IST
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MUMBAI: Sterlite Industries, a subsidiary of Vedanta Resources, is raising 2,500 crore through sale of 10-year bonds to refinance its current obligations in the first corporate bond issuance of the financial year starting Monday.

The bonds will be in tenors of 10 years with a put and call option after five years, which means, the bonds can be bought back or held at the end of 5 years till the end of ten years.

A mail sent to the company about the issue remained unanswered.

The bonds, rated AA+ by the rating agencies, have been priced at 9.10%. Similar rated Hindalco bonds issued last year at a coupon in the range of 9.50-9.60% are now trading at 9.10-9.15%. Sterlite raised 1,000 crore through similar tenor bonds at 9.25% in the beginning of this quarter and at 9.40% in December.

"The bonds should go through without much trouble," said one of the three arrangers of the issue, who didn't wish to be named.

"The pricing is competitive and there's a premium on the quality of the credit," he added.

Last week, Food Corporation of India raised 5,000 crore worth of sovereign guaranteed bonds at coupons ranging between 8.62%-8.80% in tenors of 10 to 15 years. According to bond dealers, the banks that have subscribed to these bonds may have to hold them in their books due to aggressive pricing of these bonds with not many takers at such low coupons.

Yields on five-year government bonds are trading at 7.96%, about 5 basis points lower than in the first week of February when yields rose to 8.04%. But interest rates are unlikely to fall any time soon, as has been indicated by the Reserve Bank of India. Thus, yields on longer tenor bonds are likely to remain sticky but yields on shorter tenor bonds may fall.
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