Sebi Approves Icicis Index-Linked Bond Issue

The Securities & Exchange Board of India has approved Industrial Credit & Investment Corporation of Indias issue of index-linked deep-discount bonds. The issue is to open in the last week of March.

The Securities and Exchange Board of India (Sebi) okay was received by ICICI yesterday, according to company spokesperson and general-manager Kalpana Morparia.

This is the first index-linked bond cleared by Sebi.

The nature of the bond has been modified by ICICI to achieve greater transparency with regard to returns on warrants and marketability.

The bond, which has a face value of Rs 6,000 with a detachable warrant of Rs 2,000, ensures a return of Rs 22,000 plus a return linked to the Sensitive Index of the Bombay Stock Exchange.

The index warrant will confer on the holder a right to receive at the end of 12 years from the deemed date of allotment an amount equivalent to the numeric value of the BSE Sensex calculated as: amount to be received, which will be the product of Rs 2,000 and the ratio of the BSE Sensex in year 2009 (average of closing Sensex between the period of 120 days and 30 days prior to the date of payment) to BSE Sensex in year 1997 (the average of closing Sensex of 30 days from the date of allotment). The amount arrived at will be payable at the end of 12 years from the date of allotment.

The arithmetic calculation involved takes into account the adjustments required in case of bonus and rights issues by a company whose equity shares comprise the BSE Sensex. Since the Sensex does not make adjustments for dividend outflow, any benefits of dividend will not be available to the investors.

The company will declare and announce the BSE Sensex 1997 and 2009 within 14 days of the completion of the 30-day and 90-day period respectively. In this scenario, the investor will know exactly what he will receive at the end of the 12th year, says Morparia.

Another major change is the conversion of the bond from a promissory note to a bond in the nature of a debenture, keeping in mind the retail investor. In case of a promissory note, each time there is a transfer, it is not recorded in the books.