The largest engineering company in India, Larsen and Toubro Ltd is planning to sell the first corporate inflation-linked bonds in the country. The move is to entice investors to a country where the price increase of goods have increased at an average of 7.2%.
The Mumbai based firm would be raising INR1 billion or US$18.2 million through the sale of ten year notes, according to a person familiar with the transaction who spoke on condition of anonymity. The bonds would be offering a yield of 165 basis points higher than the inflation rate based on the monthly wholesale prices of goods.
The infrastructure company is following the lead of the Indian government in issuing these kinds of notes. The administration of Prime Minister Manmohan Singh would be offering as much as INR150 billion of these notes by June, according to an announcement from the Indian Finance Ministry. The inflation rate was at 10% back in September 2011 and is increasing at a slower pace since 2009.
The projected profits from the 11.45% rupee denominated notes that would fall due on December 2018 dropped by one basis point to 8.49% today according to data obtained by Bloomberg News.
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