30-year bonds for Bangalore metro

30-year bonds for Bangalore metro

Business Standard

The domestic debt market is set to see the debut of the longest maturity corporate bond. A special purpose vehicle, the first of its kind to be floated jointly by the government of India and the Karnataka government, will float a 30-year bond for the Bangalore metro rail project. UTI Bank will manage the issue.

The SPV, Bangalore Mass Rapid Transit Road, has been jointly floated by the state and the Central governments for raising funds. According to market sources, the SPV will borrow Rs 800 crore (Rs 8 billion) from the debt market with the 30-year paper.

The longest maturity paper available in the market now has a remaining term of 17 years. Floated by the Power Finance Corporation, it is a zero-coupon bond that matures in 2022.

Reliance Industries has raised resources through longer dated paper, but these were overseas issues.

The project cost of Rs 6,000 crore (Rs 60 billion) will be met equally through equity and debt. The borrowing will consist of a term loan from banks, besides the Rs 800 crore bond issue. Sources said Rs 2,200 crore (Rs 22 billion) would be raised as a term loan from a bank.

The equity of Rs 3,000 crore (Rs 30 billion) will be availed through budgetary support from the states and the Centre.

This would be one of the major endeavours put forward by the government in promoting infrastructure spending, said sources.

Yields on bonds in the secondary market have come down sharply with a rally in the government securities market. Many of the corporate borrowers, who have been sitting on the fence, are now planning to tap the market.
The proposed bond issue of the SPV will reflect the outlook on the pricing of the long-term bonds in the market