Nicholas Piramal India Ltd. (NPIL) has announced that it was placing Rs. 25 crore through an issue of MIBOR-linked debentures at a spread of 10 basis points over the overnight NSE MIBOR. The debentures have a 364 days maturity with a dairy put/call option. The issue is rated 'A1+' by ICRA Limited. The proceeds of these debentures will be utilized to refinance Rs. 35 crore commercial paper redemption, which was raised in August 2002 at a weighted average rate of 6.13 per cent p.a.

NPIL has over the last 12 months been pursuing an aggressive treasury management strategy in order to bring down its cost of borrowings. Earlier this financial year, NPIL raised Rs. 100 crore by way of an issue of secured non-convertible debentures split into two year (6.90 per cent) and three years (7 per cent) tranches, in order to substitute high cost debt.

During the last one year or so, NPIL has churned its debt portfolio, (including the one-payment of Rs. 200 crore debt from ICICI Ltd. taken for acquisition of Rhone Poulenc India Ltd.), resulting in an overall reduction of the cost of borrowing by 400 basis points. NPIL has consciously decided to fund its acquisition through debt since its weighted average cost of debt (post-tax) is only 4.10 per cent. NPIL also reduced its borrowings in the first six months of F-2002-03 by Rs. 43.40 crore through prepayments made possible by storing cash accruals from operations. Thus, the company's leveraging has dropped form 118 per cent on March 31, 2002 to 86 per cent on 30th September 2002. NPIL's debt: equity ratio is expected to reduce further by 31st March, 2003.