Idbi Rs 250 Crore Flexibonds Float To Have Four Options

The Industrial Development Bank of India (IDBI) will launch a Rs 250 crore issue of Flexibonds-11 (Series 2002-A) on December 28.

The issue will remain open to public for subscription till January 15. The issue is rated 'AA+' by Credit Rating and Information Services Ltd and 'LAA+' by Investment Information and Credit Rating Agency signifying high safety with regard to timely payment of interest and repayment of principal.

There are four instruments to suit the needs of investors --IDBI Infrastructure (Tax Saving) Bond, IDBI Regular Income Bond, IDBI Growing Interest Bond, and IDBI Money Multiplier Bond.

The infrastructure bond has four options -- annual interest (3 options) and cumulative option.

The investor has option to receive interest of nine per cent payable annually for three years, 9.30 per cent. payable annually for five years and 9.60 per cent payable annually for seven years and yield to maturity (YTM) of 9.11 per cent in the cumulative option after a period of three years and six months.

Bonds are eligible for tax benefits under section 88 of the Income Tax Act, 1961, up to an investment of Rs 80,000. IDBI said priority would be given for allotment of bonds under infrastructure bond over other instruments of the umbrella issue.

The regular income bond has two options. Investors can earn an annual return of 10 per cent for a tenure of seven years or an annual return of 10.50 per cent for a tenure of 10 years.

The investor has the option to receive interest payments either monthly or annually. There is no put or call option for the bond having seven year tenure, while for the ten year bond IDBI has a call option after seven years.

Growing Interest Bond carries step-up the interest rates, rising every year from 9.00 per cent for the first year to 9.75 per cent in the 4th and 5th years (YTM for 5 years 9.41%). The bond has a put option after two years.

For the Money Multiplier Bond the investors for an initial investment of Rs 5,000 receives Rs 8,000 after a period of 5 years and 2 months (YTM of 9.51 per cent) or Rs 10,000 after a period of 7 years and 3 months (YTM of 10.03 per cent).