Two corporates in India, Uttar Pradesh Power Corporation and Andhra Pradesh State Beverages Corporation sold government guaranteed rupee. The goal of this scenario is to diversify investor bases. Uttar Pradesh Power Corporation (UPPCL) plans to raise $512m. Previously, the company had the successful issuance of Rs39.51bn of 9.7% bonds on March 29. UPPCL has sold three to 10-year bonds in redeemable principal part format. So, this upcoming deal would be in the same format with the previous deal.
Andhra Pradesh-owned firm Andhra Pradesh State Beverages Corporation (APSBCL) also sold Rs83.05bn 9.62% bond. The issuer has handled the wholesale as well as the retail trade of alcohol for the state government. Both companies have the same goal. They want to tap the bond market in order to lessen reliance on state funds. UPPCL, managing director, Pankaj Kumar argued that it is vital for government entities to leverage borrowing sources.
He added that it could lead to the ability for the state to manage debt levels by allowing state-owned companies to enter the bond market. Some states even struggle to finance the fiscal deficit target for as much as 3.5%. The implementation would take place probably in the fiscal year in March 2023 after a 4% target. This is based on the information from chief economist at India Ratings, Devendra Pant. Based on the Reserve Bank of India data, the two corporations met high gross fiscal deficits. The ratios are 3.5% and 4.7% respectively.
Madan Sabnavis, the chief economist at Bank of Baroda argued that this kind of bonds could raise the contingent liabilities. It could be treated as off-balance-sheet items for accounting purposes. This is because the states still have enough space for the guaranteed rupee within the limits.
