IDBI to raise $250m via overseas bond float

IDBI Ltd will raise $ 200-250 million from the overseas bond market in the third week of December. It has received the Reserve Bank of India's (RBI) approval to raise an aggregate of $300 million against the Rs 1,200-1,300 crore restructured textile loans. Barclays and Merrill Lynch are the front-runners to the issue.

"Raising foreign debt is part of our resource raising requirement. We are likely to go for $200-250 million issuance initially. We will raise the balance $50 million through other forms of foreign loans in order to reduce costs," O V Bundellu, executive director, IDBI said.

IDBI has also filed an umbrella prospectus with the Securities & Exchange Board of India to raise Rs 3,000 crore through its domestic retail offering of Flexibonds, he added.

"We have been given approval to raise external commercial borrowings under the textile restructuring package," said Bundellu. IDBI has taken a haircut of three percentage points in the restructuring of textile loans, from 11-12 per cent to 9 per cent.

IDBI will be the third largest financial institution to tap the overseas debt market in the last few months, following State Bank of India's $400 million and ICICI Bank's $ 300 million offerings.

IDBI has decided to tap the overseas market since there is good demand for Indian paper and plenty of liquidity in the market, said Bundellu. "Margin for Asian paper has fallen," he said, adding that with the IDBI transformation story completed, this is a good opportunity to go to the international market.

With the merger between IDBI and IDBI Bank coming into play by the end of fiscal 2005, there will be a change in the resource raising exercise.

"We will raise more funds through savings and current account deposits as these will help bring down the cost of funds through the retail banking," said Bundellu.

Today, the cost of funds for IDBI stand at 5.92 per cent. IDBI will continue to raise funds through infrastructure tax-free bonds and flexibonds under its retail brand as well as wholesale funds through the Omni bond brand, he added.