Citicorp Fin to raise Rs 250cr via equity-linked debentures

Citicorp Finance (India), a subsidiary of US-based Citigroup, is to raise Rs 250 crore through the issue of equity-linked debentures in more than one tranche. The novelty - returns for investors will be linked to equity benchmarks.

Rating agency Crisil has assigned a AAAr/stable rating to the instrument. It said the suffix 'r' reflects the fact that returns on these instruments are also exposed to non-credit risk - in this case market risk - and the rating does not address the variability of returns on account of such risk.

The returns for investors in the debentures will vary depending on the performance of a chosen equity benchmark. The benchmark could be an exchange index of a basket of equity shares. The instrument would also carry options like capital protection and no capital protection.

The formula for calculation of returns will vary with instrument variants. A particular variant could, for example, provide capital protection with an equity-linked upside while another one without capital protection could
have a possibility of negative returns, Crisil said in a statement today.

Citicorp proposes to use hedging strategies to mitigate the impact of the risks arising out of these instruments on its earnings.

Crisil said its rating applies purely to the credit risk aspect of these instruments, and investors will need to bear in mind that there is significant non-credit risk associated with these instruments, and define their expectations accordingly.