Icici Set To Issue 28-Yr Bonds

Industrial Credit Investment Corporation of India (ICICI) is set to float a bond with a tenure of 28 years and six months, the first non-government bond with such a long tenure. However, this record may not last long, with the Industrial Development Bank of India (IDBI) reportedly planning a 30 year bond.

ICICI has also pegged interest on five-year money at 12.75 per cent in its proposed Rs 600 crore retail bond issue, setting a new benchmark for term money. The previous floor for term rates offered by a financial institution was set by IDBI, which offered five-year paper for 13.5 per cent.

With ICICI fixing its coupon, the market has finally got a benchmark. Since ICICI is an AAA rated company, other entities are expected to price issues over ICICIs rate. However, sources said IDBI might peg its rate lower than ICICIs.

ICICI has filed its bond issue prospectus with the Registrar of Companies to raise Rs 600 crore from the retail debt market. The issue will open for subscription on December 1 and close on December 23. It will be listed on BSE and NSE.

The issue will offer three instruments a money multiplier bond and regular bond to raise Rs 250 crore, with a greenshoe option of Rs 250 crore, and a tax-saving bond to raise Rs 50 crore, with a greenshoe option of Rs 50 crore.

The FI has already given a firm allotment, worth Rs 15 crore, to ANZ Grindlays under its regular income scheme, said sources. The regular income scheme has a five-year tenure. ICICI offers three options under the scheme, namely a monthly payment option, which offers 12 per cent per annum and requires a minimum subscription of Rs 30,000, a half-yearly option at 12.25 per cent and annual payment at 12.75 per cent. Grindlays is reported to have opted for the half-yearly option.

Under the tax-saving scheme, investors will have the option to invest for five years, getting a coupon of 12 per cent and benefits under Section 88 of the Income Tax Act in return. Another alternative offers benefits under Section 54EA. Investors can also opt to invest for seven years, at a return of 12.5 per cent, and benefits under Section 54EB of the Income Tax Act.

Under the money multiplier bond, ICICI will offer bonds with a tenure of 28 years and six months. For an investment of Rs 3,000, investors will receive Rs 100,000 after 28 years and six months at a yield to maturity of 13.09 per cent.

The minimum subscription for this scheme is Rs 3,000, while the minimum tenure is three years and seven months.