The maiden bond issue of Jawaharlal Nehru Port Trust to raise around Rs 500 crore (Rs 5 billion) has hit a roadblock. The private placement issue was expected in the first week of November.

According to market sources, the bond issue is in hot water as the Reserve Bank of India has barred banks from trading in privately placed unlisted bonds.

Market sources said that even if a bank or institution picks up the paper it will have limited exit route as the market for privately placed bonds is slowly drying up. The JNPT issue is AAA rated and redeemable in the third and the fifth years.

Similarly, other public sector undertakings which have deferred their bond issues, which was supposed to have hit the market this month, are Konkan Railway Corporation, National Thermal Power Corporation, Nuclear Power Corporation and GAIL India.

Meanwhile, small unlisted companies with less fund requirement stretching across short tenors are using the opportunity to hilt to raise funds through commercial papers (CPs).

While Cholamandalam Finance has come out with two CPs, of one year and 90-day maturity, to raise funds, Associate India, a Citigroup floated non-banking finance company, has come out even with one year non-convertible debenture.

Market sources said volumes in the private placement market has dipped drastically after the diktat was issued by Sebi followed by draft guidelines from the RBI.

Under the revised guidelines, a company has to go for listing of the bond issue and approach the market with an issue prospectus similar to the case of a public issue.

While the move is intended to make the private placement market more transparent, merchant bankers feel that when the Companies Act has provided for such a market, regulators' worry seems exaggerated.

This is because the market is a wholesale one with virtually no retail interest. Moreover, ban on trading by brokers in unlisted bonds will hinder the process of price discovery for new issues.