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Nicholas Piramal debenture rides on slide in rates

Mumbai, Nov. 25: In an indication of companies beginning to take advantage of the prevailing low interest rate regime, Nicholas Piramal India (NPIL) today announced that it had re-financed its earlier debt by raising Rs 25 crore through an issue of Mibor-linked debentures.

Debt market analysts said both top-rated and middle-rung companies are likely to follow suit in the days ahead.

NPIL said it had placed Rs 25 crore at 5.52 per cent, which is a spread of 3 basis points over the repo rate and 10 basis points over the overnight NSE Mibor. The proceeds of the debenture that have a 364-day maturity will be utilised to refinance Rs 35-crore commercial paper redemption, which was raised in August at a weighted average rate of 6.13 per cent.

NPIL chief financial officer N. Santhanam told The Telegraph that the company could use a combination of strong cash accruals and raise money at competitive rates to bring down its debt levels during the current financial year.

For the period ended September 30, 2002, NPIL had a debt-equity ratio of 0.8:1 and its total debt was placed at Rs 290 crore. It hopes to bring this down to Rs 240 crore by the end of this fiscal largely through cash accruals. It has already brought down its borrowings in the first six months of this year by over Rs 43 crore through pre-payments made possible by strong cash accruals from operations. NPIL has largely funded its acquisitions through debt.

The company has, over the past one year, been pursing an aggressive treasury management strategy to bring down its cost of borrowings. Earlier this year, it raised Rs 100 crore by way of an issue of secured non-convertible debentures split into two-year (6.90 per cent) and three-year (7 per cent) tranches in order to substitute high-cost debt.

It also churned its debt portfolio including the pre-payment of Rs 200 crore debt from ICICI taken for the acquisition of Rhone Poulenc India, which brought about an reduction in the cost of borrowing by 400 basis points.

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