HPCL to raise $350 mn via issue of bonds

Hindustan Petroleum Corporation (HPCL) plans to raise around $350 million this year through issue of bonds to overseas investors, reports suggest.

While the company is working on raising $400 million in external commercial borrowings (ECB), it plans to raise another $350 million through issue of bonds to overseas investors. HPCL is reportedly securing ratings for the bond issue.

According to the Reserve Bank of India (RBI) guidelines, companies can raise $750 million overseas under the automatic route. After raising ECBs, the remaining sum will be raised through bond.

At the current rates, foreign funds are around 200 basis points cheaper than domestic funds. Although the market sentiment has improved for government-owned companies, OMCs such as HPCL are heavily dependent on borrowings owing to the subsidy burden they carry for selling diesel and cooking fuels below market price.

Unlike the OMCs, ONGC does not have any pressing need to raise money. However, its overseas arm ONGC Videsh may raise around $900 million in the overseas bond in January 2013.

The first-ever bond issue from the company is aimed at testing the overseas money market for a company that has drawn huge capex plan, and has largely been dependent on its parent for funding acquisitions.