India REC bond sale sees bids of over 25 bln rupees- sources

MUMBAI Fri Nov 2, 2012 3:15am EDT

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MUMBAI Nov 2 (Reuters) - India's Rural Electrification Corp Ltd has received bids of over 25 billion rupees ($465.03 million) for its minimum 5 billion rupees bond sale, four sources with knowledge of the deal said.

The firm is raising funds through seven-year bonds and 10-year bonds with bullet repayment at 9.02 percent, they said.

Hardening of interest rates was evident in the higher coupon fixed for the bond sale by the quasi sovereign, which printed its last deal at 8.84 percent for two year funds in the start of October.

"On the policy day REC 10-year was trading at 8.92 percent, so the cost of funds have gone up by 10 basis points," said a head of fixed income at a brokerage firm.

The cost of borrowing has sharply risen for corporates after the central bank policy review in October where it left interest rates on hold defying pressure from the government to lower rates.

Strong demand was seen among banks for the issuance in the seven-year tenure while provident funds invested in 10-year tenure, said the source.

The issue, rated AAA by Crisil and LAAA by ICRA, is tentatively slated to open on Monday and close on Wednesday, it showed.

The seven-year tenure bonds with staggered yearly redemptions starting from the fifth year was scrapped citing lack of demand, sources said. ($1 = 53.7600 Indian rupees) (Reporting by Archana Narayanan; Editing by G.Ram Mohan)

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