Oil and Natural Gas Corp (ONGC) has provided its first guarantee in 15 years for a rupee-denominated bond, likely to be issued by a subsidiary this quarter, three sources aware of the matter said on Thursday.
ONGC Petro Additions Ltd (OPAL), in which ONGC owns more than 95 per cent stake, is looking to raise ₹5000 crore ($563.22 million) through a multiple-tranche bond sale, they said.
However, with rating agency Crisil designating OPAL’s bonds at AA+ two months ago, ONGC stepped in to enhance its appeal to investors, the sources said, requesting anonymity as they are not authorised to speak to media.
ONGC’s unconditional and irrevocable guarantee enhances the credit rating to provisional AAA (CE).
ONGC will ensure OPAL’s commitments are duly met within the stated timelines, the rating agency said in a note.
This is ONGC’s first such guarantee since January 2010, when it backed bonds of another subsidiary, ONGC Videsh Ltd.
OPAL, which has set up a petrochemical project in the west Indian state of Gujarat, is looking to raise funds through a five-year bond issue, and is in talks with some large state-run investors to act as an anchor, which would provide some confidence to other investors, another source said.
“Generally, the issuer has been pushing for very low coupon rates, but with investors uneasy about exposure at lower yields, the issuance size has always been smaller,” one source said.
Once OPAL is able to get an investor on board, it would come out with the issue within this quarter.
Neither company replied to a Reuters’ email seeking comment.
Currently, OPAL has outstanding bonds worth ₹1760 crore. It had last tapped the bond market 15 months ago and raised ₹160 crore through a three-year bond issue at 8.39 per cent.
