rediff.com: Maruti Udyog's bond issue to set benchmark

Maruti Udyog Limited's bond issue slated for launch on July 11 will determine corporate bond yields in the near term, money market brokers said on Saturday.

"It is a AAA rated paper and the coupon at which it is priced will be crucial for future corporate borrowings," a dealer in an investment firm said.

Maruti is an equal venture of the Indian government and Japan's Suzuki Motor Corp. It is the country's biggest car manufacturer with a market share of a little over 50 per cent.

The firm will issue bonds for Rs 2 billion from July 11 through the book-building route. It will raise five-year funds with the coupon ranging from 10.90-11.40 per cent. Diversified Larsen and Toubro is also issuing five-year bonds for Rs 1 billion at 11.25 per cent.

West Bengal Industrial Development Finance Corporation too is issuing five-year bonds at 12.75 per cent, semi-annualised, while it is raising seven-year funds at 13.0 percent semi-annualised, money market brokers said.

In the secondary debt market, yields fell slightly this week after a reduction in rates of the Employees Provident Fund scheme on June 30.

Easy liquidity conditions in the money market also led to some bidding interest in long term corporate bonds, they said.

The two-year bond issued by the Housing Development Finance Corporation recently was traded at a yield of 10.85 per cent compared to 10.90 per cent in the previous week, dealers said.

India reduced the rate on the EPF scheme to 11 per cent from 12 per cent, aligning it with other retirement schemes.

Call money rates fell to around 7 per cent this week from around 12 per cent last week on coupon inflows but government bond prices remained steady on expectations of fresh bond auctions.

Dealers said sustained borrowing by ICICI Limited through issue of one-year bonds this week kept yields at the shorter end from dropping sharply despite ample rupee supplies in money market.

ICICI was issuing one-year "on tap bonds" at rates ranging from 10.80-10.90 per cent throughout the week, money market brokers said.

Bids emerged for long-dated bonds after two weeks amid easy liquidity conditions. Tight liquidity conditions in the past two weeks in the money market had dampened sentiment for long term corporate bonds.

Dealers said state-run banks and insurance firms were bidding for the seven-year bonds issued by the Industrial Development Bank of India.

The yield on the bond dropped to 11.46 per cent from 11.70 per cent two weeks ago, dealers said.

(c) Copyright 2000 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.


	HOME \| MONEY \| REUTERS \| REPORT