REC Plans to Raise Rs.6,000 Cr on Friday, NCDs given The Highest rating of ‘AAA’

REC Ltd. is a Maharatna company under the administration of the Ministry of Power, It is registered with RBI  as a Non-Banking Finance Company (NBFC), Public Financial Institution (PFI) and Infrastructure Financing Company (IFC). The company is set to raise Rs.6000 crores through bonds which have been accredited with the highest credit rating of ‘AAA with a stable outlook by CRISIL and ICRA.

Details of the Plan:

The company has planned to raise Rs.6000 crores through two bonds both of them having different maturities, From the first bond the company has planned to raise Rs.3,500 crores which will also include a greenshoe option for another Rs.2,500 crores. The maturity of this will be in 10 years and 17 days, specifically on May 31, 2024. In addition to this, REC plans to secure an additional amount of Rs.3500 crores by reissuing their existing 6.90% bond, which is set to mature on March 31, 2031.

What is a greenshoe option?

The Greenshoe option is  a key component of underwriting agreements, It grants underwriters the authority to issue additional shares to the investors beyond the initial allocation which was determined by the issuer. This provision comes into play when the demand for a particular security issue has surpassed the initial expectations which were mentioned by the issuer. By exercising this Greenshoe option, the underwriters can meet this surpassed demand effectively, this will also ensure that the investors have access to the desired amount of shares while maintaining stability in the market. This option therefore acts as a strategic tool in managing the dynamics of securities offerings, optimising the process for both issuers and investors.

Stock Performance:

The stock of REC Ltd has given stellar returns of more than 300% in the past year, The stock is currently trading at Rs. 543 a piece near its 52-week high of Rs.567, The 52-week low made by the stock is at Rs.127.40.

Conclusion: The Non Convertible Debentures of the PSU NBFC, have been given the highest rating of ‘AAA’  by CRISIL  and ACRA  with a stable outlook, The company has invited bids for the same on Friday, May 14 as the pay-in date when the investors are required to send funds to the issuer in exchange of the bonds.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.