Tuesday January 6, 07:42 PM

ONGC unit raises $1 bln via CPs - sources

By Anurag Joshi and Narayanan Somasundaram

MUMBAI (Reuters) - ONGC (ONGC.NS : 1181.5 +8.2) Videsh Ltd (OVL), a unit of state-run oil exploration company Oil & Natural Gas Corp, on Tuesday raised 50 billion rupees ($1.03 billion) through a one-year commercial paper issue, two sources familiar with the deal said.

The issue was the biggest-ever CP transaction in India, one of the sources associated with the transaction said.

ONGC Videsh is in the process of a 1.3 billion pounds ($1.9 billion) takeover of UK-listed oil company Imperial Energy.

"The one-year CPs were sold at a coupon of 8.15 percent," one of the sources said, adding Citigroup was the sole arranger.

The issue was rated 'P1+ (so)' by rating agency Crisil, the highest available rating, the source said, adding that it carried a guarantee from ONGC.

One banker said the issue should attract investors.

"There is a lot of value in the short end of the curve. There is almost a spread of 400-450 basis points from the overnight rates," said Nirav Dalal, head of debt capital markets at Yes Bank (YESBANK.NS : 255.05 +1).

"With liquidity flush in the system, call (money) is likely in the range of 3.5-4.0 percent from the next fortnight. There is immense value," he added.

On Friday, the Reserve Bank of India cut its key lending and borrowing rates by 1 percentage point each. It also lowered banks' cash reserve requirements by 50 basis points to 5 percent, effective Jan 17, which is expected to add 200 billion rupees into the banking system.

($1 = 48.7 Indian rupees)