Hyderabad: The Andhra Pradesh government hit a jackpot on Friday with the overwhelming market response to its bonds issued through the AP Beverages Corporation Limited, that fetched Rs 8,000 crore.
The government had proposed to mobilise a minimum of Rs 2,000 crore by offering non-convertible debentures (NCD). The markets responded positively and oversubscribed the bonds by five times. “We would like to utilise only Rs 8,000 crore at present,” a senior state official told Deccan Chronicle.
Earlier, the Telugu Desam government had put bonds for sale through Amaravati Development Corporation with huge fanfare and the then Chief Minister N. Chandrababu Naidu attended the customary bell ringing ceremony at Bombay Stock Exchange.
The sale of Amaravati bonds with 10.52 per cent interest rate fetched Rs 2,000 crore. This time, Chief Minister Y.S. Jagan Mohan Reddy preferred to keep the release of bonds a low-key affair. Sources said the base interest rate of 7.5 per cent was fixed for bidding but the same ended up at 9.5 per cent.
The rating agencies – Crisil and India Rating – put the bonds being offered in stable category. India Rating gave “Provisional AA (CE) stable” based on several factors including the government’s commitment to not change the existing policy of owning both wholesale and retail liquor trade.
The revenues from sale of liquor doubled to Rs 18,000 crore in the last fiscal from the previous year’s Rs 9,000 crore and about Rs 1,000 crore before the takeover of the retail trade. Trust Invest had been chosen as merchant banker through competitive bidding.
Another attractive feature, the official pointed out, of the bonds was that the government committed to making quarterly servicing of the bonds and it planned to open an escrow account and deposit the requisite amounts on a daily basis into it. Secondly, the government will have the leverage of raising fresh amounts from the market to the extent of the debt already serviced in each quarter, the official pointed out.
Interestingly, the government, according to the report of India Rating, also gave a commitment that it would not impose a total or partial prohibition on alcoholic beverages. “If government imposes a prohibition on the sale and consumption of liquor, it will ensure premature redemption of all outstanding bonds within three months from the date of such an imposition,” said the note.
