Issuance of UDAY bonds by Rajasthan: Emergence of a success model


UDAY scheme launched by the Central Government with a view to revive and provide for the financial turnaround of debt laden distressed DISCOM’s finally seems to bear the fruits of the success. One the most stressed distribution utilities in India, DISCOMs of Rajasthan have received a major relief emanating from UDAY scheme.

Rajasthan has successfully completed the auction of Non-SLR bonds worth Rs. 20,807.32 crores on 21st June, 2016. RBI has lauded the achievement of the State and has deemed the process of auctioning for its transparency and immaculateness.

The bonds were oversubscribed nearly doubled by the financial institutions as compared to the scenario observed in other states. Punjab managed to sell Rs. 6000 crores worth of bonds out of Rs. 7000 crores worth bonds issued. A similar case was observed in Uttar Pradesh where issued bonds worth Rs. 24,322 crores worth of bonds remained under subscribed at Rs. 23,372 crores.

Auctioning process of bonds A Glimpse

The Government of Rajasthan Through its ‘Expression of interest (EoI)’ on 16th June, 2016 invited eligible entities which includes Scheduled Banks, Pension Funds, Investment Bankers, Insurance Companies  to participate  in auction. The term and conditions for the issuance of bonds were as follows-

Sl. No. Particulars Description
1. Amount Rs. 20,807.32 crores
2. Purpose Bonds are issued to take over the debt liability of the three DISCOMs of the State i.e. Jaipur Discom, Jodhpur Discom and Ajmer Discom.
3. Face Value Rs. 100 of each bond
4. Redemption value Rs. 100 of each bond




· Bonds issued of equal STRIPS (Separate Trading of Registered Interest and Principal of Securities) with maturity period of 2 to 10 years.

· Each subscriber has to subscribe for the entire ‘Structure’ ranging from 2 to 10 years.

6. Minimum offer Rs. 900 crores with no provision for the formation of consortium or joint offers.
7. Coupon A Uniform Spread to be offered by the investor with a cap of 75 basis points over the Government Security (G- Sec) yield.
8. Interest Nominal Interest payable half yearly till maturity at a rate decided by the State government
9. Submission offer The EoI was to submitted before 1100 hours on 21st June, 2016
10. Principles of Issuance · Subscriber to purchase bonds for the entire Structure i.e. 2,3,4,5,6,7,8,9 and 10 years of maturity period.

· Issuance amount to be distributed uniformly cross all tenors.

· In case, offer ratio is greater than one or over-subscription allotment to be done on pro-rata basis.



  1. The eligible participants to quote the spread at which it intends to subscribe the entire structure along with the quantum of subscription latest by 1100 hours on the day of auction.
  2. The lowest uniform spread for all strips with a cap of 75 basis points will be considered as the “cut-off” spread latest by 1400 hours on the day of auction.
  3. Revised proposal for the quantum of cut-off to be submitted by all participants latest by 1700 hours on the day of auction.
  4. The eligible participants with the lowest offer will be allowed to increase the quantum of investment but not to reduce the quantum under no circumstances below the initially stated level in EoI.
  5. Finally, the allotment to the intended eligible participants to be done on the same day. On finalization of spread and quantum, the successful participant needs to submit a mandate to RBI to debit their current account in RBI or other banks.



UDAY is proving to be a boon for the debt laden Discoms like Rajasthan, but there is a long way to go. There are still many States that in spite the financial restructuring program are still in a pathetic conditions and not have been able to curb technical and commercial losses which are as high as 35% in some states. It’s the need of the hour that Discoms must prepare a plan to operate efficiently and to reduce its technical and commercial losses, as the same will affect the subscription during the auctioning process. The performance of Discoms shall play a vital role in successful implementation of UDAY scheme in its true spirit.

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