The bumper listing of State Bank of India’s (SBI) retail bond issue has put life back into the primary market. Investors, who had put a full subscription of Rs 5,00,000 in the issue, made a cool 4 per cent or Rs 20,000 in just about 21 days. This is on the back of better than expected listing of the bond, which was being quoted at a premium of Rs 300 in the grey market of Gujarat and Mumbai above its face value of Rs 10,000.
SBI Bond ‘N’ series was listed at a premium of Rs 365 on the National Stock Exchange (NSE) against the face value of Rs 10,000. During the day, the counter also touched a high of Rs 10,385 before it closed at Rs 10,250.
While investors seem to have made around Rs 15,000 if they sold the bond on Wednesday around its listing price, they would get an additional Rs 5,000 by the end of this month in their account. The bond holders will get Rs 2,700 as interest at the rate of 9.75 per cent on their application as the issue closed on February 26 and the bonds were credited to investors’ demat accounts only on March 16. The interest is for these 20 days. Also, investors will get another sum of Rs 2,080 as interest at the rate of 9.95 per cent, which was the coupon rate of the bond. The logic is that SBI’s cut-off date for paying the interest on bonds is March 31, so investors will get this money for holding the bond for another 15 days.
“The bond issue, which was supposed to give around Rs 40,000-Rs 50,000 annual return, has given 50 per cent return on listing itself. This has generated euphoria among grey market operators and investors, who have set their sights on the forthcoming issues now,” said a Mumbai-based equity dealer.
A large number of brokers, who had pitched dummy investors to subscribe to the issue on their behalf, made at least Rs 10,000 each from the issue.
They had promised Rs 15,000 to investors upfront to apply on their behalf and the rest of the gains were to be passed on to the brokers. A few large brokers had at least 40-50 investors to apply on their behalf. Also, brokers were being offered 1.25 per cent as commission on each subscription. Brokers have now set their sights on the forthcoming retail bond issues of Tata Motors and Allahabad Bank, which will hit the market in a couple of months. The coupon rates, too, are likely to be higher around 11 per cent. Together, 54,96,996 applicants received bonds worth Rs 10,000 each. The issue, which had opened on February 21, closed on February 28.
