PowerGrid Corporation of India scraps Rs 3,500-crore bond sale over pricing

MUMBAI: PowerGrid Corporation of India has scrapped its Rs 3,500-crore bond sale last week as investors balked at its demand for lower pricing after indicating a higher one since the yields began to fall after indicated pricing. Investors had informally agreed to receive 8.53% on a 10-year paper from the staterun company, which was rated ‘tripleA’. But the pricing of a peer state-run firm at 8.5% for the same tenor made PowerGrid seek an identical pricing which the investors were not willing for, said three people familiar with the matter.

But PowerGrid unintentionally might have bet on the wrong side expecting lower prices soon after NHPC, the state-run hydel power producer, priced its issue.

Yields are expected to climb next week by a few basis points since the Reserve Bank of India has said it would sell government bonds worth Rs 10,000 crore to suck out excess liquidity that was pulling down yields.

“In a supply laden week, additional supply in the form of OMO (open market operation) sales is expected to push up G-Sec yields,” said Soumyajit Niyogi, interest rate strategist, SBI DFHI. “This in turn also exert pressure on corporate bond yields.”

Issue cancellation is nothing unusual in corporate bond market but issuers normally do it immediately after arrangers quote bids which are higher than expected, or if it deviates widely from the prevailing ones for peers. “The proposed bond issue scheduled earlier has been deferred and revised dates will be intimated shortly,” PGC wrote to arrangers.

Axis Bank, SBI Cap, Kotak Bank, Trust Investment, Yes Bank, ICICI Bank, Edelweiss Financial, I-sec primary dealership, and SPA Capital were the arrangers for PowerGrid.