Food Corporation of India (FCI) plans to raise up to 80 billion rupees ($1.29 billion) in government-guaranteed bonds through a private placement, according to a term sheet, in what traders said could potentially be the country's biggest corporate debt sale.

The current record holder is Air India Ltd's 74 billion rupee sale of government-guaranteed bonds in July 2012. But India lacks reliable data on corporate bond sales.

Like Air India, a large portion of the FCI sale is expected to be bought by state-run insurer Life Insurance Corp of India because of the targeted issuance size, traders added, although demand is expected to be healthy for the debt sold to investors.

FCI's sale comes amid a dearth of quasi-sovereign corporate issuers recently and expectations the central bank will hold off on further interest rate hikes after tightening monetary policy by 75 basis points since September.

"There is a decent amount of demand if it comes at a fair rate," said Ashish Jalan, a fixed-income fund manager at SPA Securities.

FCI solicited quotes from investors by Tuesday, and plans to issue five-, eight- and 10-year bonds, according to the term sheet, which must be given at a spread of no more than 60 basis points over the underlying benchmark rate.

The base size of the issue is 10 billion rupees, but has a greenshoe option of 70 billion rupees.

FCI said the proceeds would be used to "augmenting" its "long-term resources."

Food Corporation of India is in charge of maintaining and distributing food gains in the country, as well as setting the minimum price support for farmers' produce and stepping to stabilise prices as required.

The debt is rated "AAA(SO)/stable" by domestic rating agencies CRISIL and CARE.

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