Sebi Nod For Rs 1000cr Idbi Debt Issue Sans Fund-Use Rider
Last week, the capital markets regulator had sent a communication to the development financial institution giving it a formal go-ahead to enter the capital market with the debt issue without creating a debenture redemption reserve.
However, it had directed IDBI to cite the absence of debenture redemption reserve in the risk factors in the prospectus to the issue.
With the waiver of the stipulation on monitoring the end-use of the issue proceeds, the last hurdle is removed. The institution will file the draft prospectus in the next fortnight on the strength of the audited results of the first quarter of 1996-97. The issue will hit the market next month, sources in IDBI said.
Market watchers, however, failed to appreciate the rationale behind the Sebi move of clearing the IDBI debt issue plan in stages.
First it allowed the institution to go ahead without creating the sinking fund but refused to give the go-ahead without the appointment of a monitoring institution to ensure the end-use of the funds. Now it has changed its earlier stand and waived the second stipulation. Both the issues could have been tackled at one go without creating any confusion, one market analyst said.
IDBI plans to tap the debt market with four instruments to mop up Rs 1,000 crore with a greenshoe option of an additional Rs 1,000 crore. Its last Flexibonds issue, which hit the market in the last quarter of 1995-96, was a phenomenal success.
This time the institution plans to float Super Deposit Bond, Equated Return Bond, Monthly Income Bond and Growing Capital Bond.
The draft prospectus will be filed after the busy season credit policy is announced, sources in IDBI said. The institution expects the long term interest rate to come down, albeit marginally.
Sebi had earlier directed IDBI to create a debenture redemption reserve and appoint a monitoring institution to ensure the end use of funds on the lines of corporates who are required to set up the reserves as a precondition to enter the debt market. It also prohibited it from offering early bird incentives.