Idbi Pares Flexibonds Rates By 75-105 Bps

The Industrial Development Bank of India (IDBI) has reduced the interest rate on its latest Flexibonds-17 issue, which will open on January 20, by 75 to 105 basis points.

The issue, which closes on February 11, has a size of Rs 300 crore and carries a greenshoe option of an equal amount. The issue has four instruments - Infrastructure (Tax Saving) Bond, IDBI Money Multiplier Bond, IDBI Growing Interest Bond, and IDBI Regular Income Bond.

It had raised over Rs 650 crore against its targeted Rs.500 crore. (Issue size of Rs 250 crore with a greenshoe option of an equal amount).

ICICI Bank is also in the market with its safety bonds, which opened on January 6 and will close at January 27.

With the latest tranche of Flexi-17, the difference between the interest rates on both the institutions is now lower at 25 to 40 basis points as against a difference of maximum 140 basis points with the Flexi-16 issue, which closed on December 22.

The Infrastructure (Tax Saving) Bond has four options - two options each of annual interest and cumulative interest. It is offering 7.25 per cent and 7.50 per cent in the annual interest options for three and five years, respectively.

In the Flexi-16 issue, IDBI offered an interest rate of 8 per cent and 8.25 per annum payable annually for three years and five years.

In contrast, ICICI Bank is offering 7 per cent per annum for three years or 7.25 per cent per annum for five years under the annual interest option.

The Money Multiplier bonds has two options. It is offering a YTM of 7.77 per cent for a 7 years and 1 month and 7.85 per cent YTM for 9 years and 2 months.

Under the Growing Interest Bond, investors will get stepped-up interest rates over five years. IDBI is offering 6.75 per cent in the first year, which will increase to a maximum of 7.75 per cent in the fifth year. IDBI will have a call option at the end of second, third and fourth years.

The Regular Income Bond offers four options. IDBI is offering an annual interest at 7.75 per cent and 8.00 per cent for 7 and 10 years, respectively, while under the quarterly interest option, it is offering 7.40 per cent and 7.70 per cent for 7 years and 10 years, respectively. ICICI Bank is offering 7.5 and 7.6 per cent for 7 and 10 years for the annual interest rate options.