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Informist, Thursday, Mar. 6, 2025

 

--Sources:IREDA likley to raise INR 30 bln to INR 50 bln via perpetual bonds 

--Sources: IREDA may seek bids for perpetual bonds in Mar 

 

By Sachi Pandey

 

MUMBAI – After REC Ltd. entered the bond market with perpetual bonds, another public sector entity is preparing to follow suit. According to two sources, Indian Renewable Energy Development Agency, is likely to raise funds through perpetual bonds in March.

 

The company is considering raising between INR 30 billion and INR 50 billion, though the final amount will depend on the coupon rate it is able to secure, which in turn is determined by investor demand, the sources noted. The issue is expected to include a call option after 10 years.

 

"They will probably come in mid-March as currently they are getting feedback on the kind of coupon they might get for the bonds," a source closely involved with transaction told Informist on the condition of anonymity.

 

Sources expect IREDA to shell out a coupon rate in the range of 8.20-8.30%, though they note that it can fluctuate depending on market conditions, which have been volatile of late.

 

A merchant banker explained that the company may have to offer a higher coupon rate for the bonds due to several factors. "First, since it's a perpetual bond, the coupon rate will naturally be higher. Then the continued supply from public sector entities means investors will demand better returns, higher coupon for taking on riskier investments. And, major investors, like provident funds and large housing finance companies, have not been active in the bond market lately, which could push the coupon rate further," the merchant banker said.

 

IREDA's perpetual bonds are rated 'AA+' by both India Ratings and Research and ICRA Ratings.

 

In February, REC raised INR 19.95 billion through perpetual bonds at a coupon of 7.99%. The issue had a base size of INR 5 billion and a greenshoe option of INR 25 billion. "When REC raised funds, the rates were lower, but as rates continue to rise, IREDA may have to offer a higher coupon," one source noted.

 

Perpetual bonds are considered risky investments as these have no fixed maturity date. Investors receive interest payments indefinitely, but the principal is not repaid by the issuer.   

 

At 1353 IST, shares of IREDA were 2.4% higher at INR 150.74, while those of REC were up 3.5% at INR 416.30 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Akul Nishant Akhoury

 

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