Icici Snips Safety Bond Returns By 25-50 Bp

ICICI, the financial institution, has cut the rate of interest on the latest issue of its safety bonds by 25 to 50 basis points.

The institution has lowered the interest rate on the regular income bonds. The eighth issue of ICICI's unsecured redeemable bonds will hit the market on February 8 and remain open till March 4.

The issue size is of Rs 600 crore with a greenshoe option of an equivalent amount. In its latest issue, ICICI has increased the options under the tax savings bonds to four from the three earlier.

The regular income bond, on the other hand, has three options. The interest rate for the seven year period for interest which is being paid semi-annually is at 9.25 per cent.

The interest rate for a similar option in the earlier issue was at 9.75 per cent. For the seven-year bond with annual interest payment the rates have been reduced from 10 per cent previously to 9.5 per cent now.

There has been a 25 basis point reduction in interest rates for the five-year tenure where interest is paid annually from 9.5 per cent to 9.25 per cent.

According to ICICI officials, the lowering of interest rates is in line with the lower yields in government securities.

The rate of interest offered by the ICICI for its regular income bond, however, is lower than the rate interest offered by the Industrial Development Bank of India (IDBI) for the similar issue.

The coupon rate (annually payable) for the IDBI bond with seven-year maturity is pegged at 10 per cent, while in the case of ICICI the rate of interest is 9.50 per cent.

ICICI is rated 'AAA' by Credit Analysis and Research Ltd (Care) and 'LAAA' by Investment Information and Credit Rating Agency (Icra).

IDBI is rated 'AA+' by Credit Rating and Information Services Ltd, 'LAA+' by Icra and 'Ind AA+' by Fitch.