The Industrial Development Bank of India (IDBI) is set to reduce the interest rate on its Flexibonds-17 issue by 60 to 80 basis points. The institution will hit the market in the third week of January with a Rs 300 crore issue, having a greenshoe option of an equivalent amount.
The issue is likely to have four instruments, including Infrastructure (Tax Saving) Bond, IDBI Regular Income Bond and Growing Interest Bond.
The interest rate on the IDBI Infrastructure (Tax Saving) Bond is likely to be cut by around 70 to 80 basis points to around 7.2-7.3 per cent for three years as against 8 per cent per annum which the institution had offered in the last tranche. For the five years bonds, the rates are likely to be slashed to 7.4 to 7.5 per cent as against 8.25 per cent per annum earlier.
The FI is still to firm up the coupons on these bonds as the rates have been continuously falling, sources said.
ICICI Bank is also currently in the market with its first bond issue to raise Rs 400 crore. The issue carries a greenshoe option of another Rs 400 crore.
The ICICI Bank issue opened on January 6 and will close on January 27. ICICI Bank is offering an interest rate of 7 per cent per annum payable annually for three years or 7.25 per cent per annum payable annually for five years under the annual interest option.
This would mean that the difference in the interest rate on the tax saving bonds between the two institutions would be at around 20 to 25 basis points.
IDBI had in its Flexi 16 issue garnered around Rs 650 crore. The issue had a size of Rs 250 crore and carried a greenshoe option of an equivalent amount. Of this, more than Rs 510 crore was garnered through the tax savings bond. IDBI is likely to retain the entire amount which it received through the tax saving bonds.
The financial institution (FI) had filed an umbrella prospectus for raising Rs 1,500 crore with a greenshoe option of an equal amount with the Securities and Exchange Board of India.
