The issue will have a base size of ₹500 crore and a green shoe option of ₹2,500 crore, they said. The funds are likely to be used for capital expenditure and refinancing of loans.
The bond sale would be NTPC’s first in the current financial year, and experts expect strong demand as is usually the norm. It is scheduled to conclude on April 17. The maturity date of the bonds is April 17, 2026.
The bonds are likely to carry a rating of AAA by rating agencies Crisil, ICRA and India Ratings.
“The EBP (NSE’s electronic debt bidding platform) bidding for NTPC is likely from 10 am to 11 am on Wednesday (April 12),” one of the sources said. “The requirement for these three-year papers issued by NTPC is very specific among investors and the supply is low because NTPC does not issue three-year bonds often.”
The person expects the cut-off yield for the bonds to be 7.5% or lower.
“REC’s bonds are currently around 7.50%. We wouldn’t be surprised if the cut-off (yield) for NTPC’s bonds would be around similar levels or lower,” the person said. “In the current environment, bond yields are falling and there is space for short-term yields to fall more.”REC is a state-owned power financing company.
NTPC had last tapped the bond market in December, selling ten-year bonds worth ₹500 crore.
Following the Reserve Bank of India’s unexpected decision to refrain from raising interest rates at its policy review last week, yields on government bonds have eased, with short-term bond yields witnessing a particularly sharp fall.
Bond prices and yields move inversely. Shorter-maturity bonds are extremely sensitive to movements in interest rates and liquidity conditions in the banking system.
Given that government securities are the benchmarks for pricing corporate debt, the decline in sovereign bond yields makes it cheaper for firms to issue debt. Moreover, a large portion of corporate debt is issued in bonds of three-to-five-year maturities.
Since the RBI’s policy statement on April 6, yields on five-year government bonds have declined as much as 16 basis points, dropping below the psychologically significant 7% for the first time in seven months.
