Sriyansh Cement can issue three years at 7.9%, five years at 8.2% or ten years at 8.6%, and already has Rs 1,200 crore maturing in year 3. Which tenor would you recommend, and why is the cheapest coupon not the answer?

Recommend the ten-year: it costs about Rs 5.6 crore a year more than the three-year, but keeps Rs 2,000 crore from falling due in year 3. The three-year stacks the new bond on an existing Rs 1,200 crore wall, twice EBITDA due in one year and far beyond free cash flow. The five-year creates a smaller Rs 1,200 crore peak in year 5. The extra coupon is insurance against refinancing into a bad market.

A family with a large loan due in three years would not take a second loan due the same month just because its rate is a little lower; it would spread the dates so no single month can sink it. Tenor choice is about the maturity profileHow much debt falls due in each future year. A lumpy profile concentrates refinancing risk in a few years. as much as the coupon, because a borrower must refinance whatever it cannot repay from cash. Sriyansh generates about Rs 350 crore a year after capex and dividends, so any year with much more than that due depends on the market being open.

The saving from the three-year is Rs 5.6 crore a year. Set that against the risk: if the market reprices Sriyansh 100 basis points higher when it must refinance Rs 2,000 crore in year 3, the extra cost is Rs 20 crore a year, and if the market is shut during a cement downturn, the cost is a liquidity crisis. Cement is cyclical, and the downturn year is exactly when refinancing is hardest and most expensive. The five-year matches the ten-year on the largest single year, but it builds a second Rs 1,200 crore wall two years after the first, Rs 2,400 crore due across years 3 to 5.

Go long. The ten-year adds no new peak and leaves year 3's Rs 1,200 crore as the only large maturity, which Sriyansh can start pre-funding now. If ten-year demand is thin, split the issue: Rs 400 crore at five years and Rs 400 crore at ten keeps every year at or below Rs 1,200 crore while saving part of the premium. Also check whether long-tenor investors in the domestic market, such as insurers and pension funds, have appetite for the name, since that decides whether ten-year pricing holds at size.