Gujarat government backed Sardar Sarovar Narmada Nigam which has proposed to prematurely redeem its 20 year deep discount bonds has attracted Sebi ire.
The market regulator has directed the Nigam to justify the redemption price of bonds and inform all the bondholders individually about it before January 10.
The Nigam had issued 20 year deep discount bonds in 1993 at a price of Rs 3,600 which were to be redeemed in 2013 for Rs 1,11,000 with an interest component of about 17 per cent per year.
While the bondholders had the option to redeem their bonds at 7th, 11th and 15th year, the Nigam did not have the right to unilaterally call back the bonds.
However, with interest rates coming down sharply and the Nigam losing out by forking out high interest rate, the Gujarat government passed a legislation last year which allowed the Nigam to prematurely redeem the bonds.
Accordingly, the Nigam has sent notices to bondholders saying it would redeem all the outstanding bonds as of January 10, 2009 at a redemption price of Rs 50,000.
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Sebi, today, in a notice said the Nigam has not taken its consent for premature redemption nor that of the bondholders.
Sebi said, "the Nigam has not indicated the approach followed to arrive at the redemption price and the justification of the price in relation to prices at which investors have been transacting in the bonds in the secondary market."
Sebi has told the Nigam to inform it as well as bondholders individually about the redemption and issue advertisements to the effect before January 8, 2009.