Steel Authority of India (SAIL) is raising Rs 600 crore through a commercial paper issuance (corporate debt) to refinance its debt and for brown field expansions.

CS Verma, chairman, SAIL said, “We are raising the funds through commercial paper mainly to repay a part of our debt. Further the company is also looking at raising funds for its expansion and modernisation but we have not yet decided on the amount and time.”

Public sector undertakings are thronging corporate bond market as banks and mutual funds evince interest in investing into these issues. “SAIL raised about Rs 600 crore from the corporate bond market with an commercial paper issuance of Rs 150 crore each in four tranches. The coupon rate for 122 to 127 day paper was 8.55 per cent to 8.60 per cent,” said a banker who invested into the issue.

Verma said, “The company has gross debt of around Rs 21,000 crore and cash of Rs 6,000 crore as of September 30. So the company keeps assessing the corporate debt market often to repay some of the debt.”

SAIL has earmarked capex of Rs 14,500 crore in 2012-13 as the final phase of its five year, Rs 72,000 crore modernisation and brown-field expansion plan.

After the modernisation and brown-field expansion SAIL’s hot metal capacity will increase to 23.4 million tonnes per annum from 14.6 million tonnes per annum. The company has been funding its Rs 72,000 crore modernisation and expansion plan through internal accruals and debt.

RINL was the other public sector undertaking in the market last week where it raised Rs 200 crore at an attractive rate of 8.75 per cent at 90 days.

NS Venkatesh, head of treasury, IDBI Bank said, “Companies are borrowing at the shorter end of the curve and not locking in at higher interest rates for a longer duration. If the RBI cuts rates in the mid-quarter on December 18, the domestic lending rates could fall further. Till then companies will meet their borrowing requirements through short term CP issuances.”