Itcs It Arm To Control Foreign Units
The Industrial Development Bank of India (IDBI) has decided to tap the fixed deposit route to raise a significant chunk of funds from the market and has thus lowered resource raising programme theough the umbrella bonds issue.
The institution has decided to file an umbrella prospectus with the Securities and Exchange Board of India to raise Rs 2,500 crore with a 100 per cent greenshoe option. This amount, however, is lower than Rs 3,000 crore (with 100 per cent greenshoe option) plan during the previous year. Senior IDBI officials said that fixed deposit scheme serves as a cost effective route to raise funds from retail investors.
The institution is also planning to offer some innovative instruments this year which include fixed and floating options, an upfront interest rate bond and a multi-option bond. Other instruments included are regular income, growing income fund, retirement bond, education bond, infrastructure bond, deep discount bond and floating bond.
Senior officials said that the "entire focus this year is to bring down the cost of borrowings in every possible way."
Keeping this in mind, the IDBI has decided to retire the first series of flexibonds raised in March 1996 from the retail debt market. It is expected to redeem two of its instruments _ deep discount bond and retirement bond_ amounting to Rs 2,100 crore in August.
Besides, if the interest rate remains stable the institution plans to redeem the balance two instruments of flexibond series one - the easy exit and regular income bonds_ amounting to Rs 180 crore. The call and the put option for these two bonds are due in March 2001.
The institution expects to save Rs 100 core per annum on account of redemption of the first series of Flexibonds. On the issue of bonds redemption, senior officials said, "It is a contract signed between the two parties which gives exit option to investors after a span of four years." The investors (of deep discount and retirement bonds) would thus have to surrender the bonds between June and August to the registrar _ Investors Services of India Ltd _ to receive redemption warrants.