Iibi Floats Three Open-Ended Bonds
The Industrial Investment Bank of India (IIBI) has floated unsecured bonds on a private placement basis for the first time to raise funds for its business operations.
The three open-ended bonds are being offered to commercial banks, provident fund schemes, regional rural banks and cooperative banks.
According to G Goswami, chairman, IIBI: We are targetting almost 200 prospective subscribers.
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Although these bonds, christened IIBI Multioption Open Bonds-Series I are open-ended and on-tap, sources are confident of netting a minimum of Rs 100 crore to Rs 150 crore immediately. All categories have a discounted option.
Once funds to the tune of Rs 250 crore are collected, the financial institution authorities may contemplate closing down the scheme.
The main features of the three bonds are:
Option A has a face value of Rs 1 lakh and a one-year tenure. Interest rate is 10.5 per cent per annum payable at the time of maturity. Minimum subscription is 25 bonds and in multiples of 5 bonds thereafter. Investors applying under this option would need to pay Rs 90,500 per bond.
No interest would be payable on the bonds under this scheme and each bond would be redeemed at face value on the expiry of one year from the date of allotment.
Option B has a two-year tenure and an interest rate of 11.5 per cent per annum payable annually. Minimum subscription and face value are same as option A.
Investors applying under this option would need to pay Rs 80,440 per bond. Each bond would be redeemed at face value at the expiry of two years from the date of allotment.
Option C offers an interest rate of 12.75 per cent and the tenure is 5 years with put and call after 4 years. Investors applying under this option would require to pay Rs 54,875 per bond.
These bonds are approved securities as per the Banking Regulation Act 1949, Indian Trusts Act 1882 and the Insurance Act 1938 and would therefore attract zero risk weight for the purpose of calculating capital adequacy by commercial banks and non-banking finance companies. The bonds are exempt from wealth tax without any monetary limit.
The IIBI has already tapped funds to the tune of Rs 300 crore since the beginning of this calendar year through syndicated bonds with financial institutions and commercial banks.
The IIBI is undertaking the exercise of issuing bonds of this nature to minimise upfront losses and strike a balance between disbursal and investments on one hand and inflow of resources on the other.
The half-yearly financial results of the institution are due to be ready shortly. Disbursals this year are reported to have shot up by around 50 per cent compared with the same period in the previous year.