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Reliance Industries raised 200 billion rupees ($2.40 billion) on Thursday, in the largest bond issue by a non-financial Indian firm, by paying 40 basis points more than the government's borrowing cost.

The company's 10-year bonds were sold at a coupon rate of 7.79%, according to merchant bankers. India's 10-year benchmark bond trades at an annualised yield of 7.39%.

"The cutoff is largely in line with company's expectations," Ajay Manglunia, managing director and head of the investment grade group at JM Financial, said. "Most of the issue has been subscribed by insurance companies, pension funds and provident funds, with some participation from mutual funds as well."

The billionaire Mukesh Ambani-led company's bond issue received bids worth 271.15 billion rupees, with major interest from insurance companies. A large state-run insurer has subscribed to half of the issue, bankers said.

The bond has started trading in the secondary market at a premium and was last dealt at 100.25 rupees and 7.7550% yield, they added.

In February, erstwhile home financier HDFC had raised 250 billion rupees through 10-year bonds at 7.97% coupon, making it the biggest bond issue by an Indian company.

Reliance Industries has paid less than what state governments have for similar issues in the recent past, indicating an "ultra-strong appetite" for high-rated longer-duration papers, bankers added.

Only India's largest lender State Bank of India has been able to raise funds at a tighter spread over government bond yields. The bank had last week raised 100 billion rupees through Tier II bonds at 7.81%, with the spread at around 35 basis points.

Reliance Industries aims to use funds from the bond issue to refinance existing borrowings, for capital expenditure and for investments in domestic subsidiaries where it has a majority stake.