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REC to tap US investors with $1-billion bond offering

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The Economic Times
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REC, one of the largest lenders to the power sector, is planning to raise $1 billion through a bond sale to US-based investors, a first for the state-run company that has so far tapped investors in Europe and Asia. “We are planning to issue 5-year and 10-year notes as part of our borrowing programme. Our target is to meet 15% of our annual funding requirements through external commercial borrowings,” Ajoy Choudhury, REC’s executive director of finance, said. The non-banking finance company (NBFC) recently sought RBI approval to raise $2 billion through sale of bonds overseas, Choudhury said. 

The company will start road shows to market the bond offering this week. 

It has hired half-a- dozen banks including HSBC, JP Morgan, Standard Chartered, Citi, Barclays and Bank of Tokyo Mitsubishi UFJ as advisers for the offering. 

REC has a loan book of Rs 2 lakh crore and provides loans to power generation companies, transmission companies, state electricity boards and renewable energy providers. 

Along with Power Finance Corporation, it ranks amongst the two largest non-bank financiers of India’s power sector. 

The company also assists the Modi government's rural-electrification policy by acting as an administrative agency for monitoring and financing specific projects. 

Ratings agency Fitch assigned a rating of BBB- to the proposed bond issue on Monday. The rating is the lowest in the order of investment grade ratings. 

“REC plays a strategic role in supporting India’s electricity sector by acting as a focal point for the provision of capital to generation, transmission and distribution projects and entities nationally,” noted Fitch analysts Barry Keenan and Guilhem Costes. 

REC is a navratna PSU and falls under the administrative control of the ministry of power. 

The company had interest income of around Rs 21,000 crore in the previous fiscal and reported net profits of nearly Rs 5,000 crore. 

Author: Sustainability Outlook Desk