The Industrial Credit and Investment Corporation of India Ltd (ICICI), recognising the hardening of interest rates, has hiked the coupon on its forthcoming retail bond issue by 50 basis points.
While ICICI had offered 13.5 percent for 5 years in April 1998, it is now offering 14 per cent. The size of the issue is Rs 300 crore with a greenshoe option of retaining a matching amount. ICICI's rate is 25 basis points higher than the Rs 400 crore IFCI issue that closed last week.
The earliest opening is on 16 July and the issue will close on 28 July. ICICI officials said that the issue is likely to open on 18 July.
On the Regular Income Bond with a maturity of 5 years, ICICI is offering a coupon of 14 per cent (annual interest payment), 13.5 per cent (for semi annual) and 13.25 per cent (for quarterly). In April 1998 ICICI had offered 13.5 per cent, 13 per cent and 12.75 per cent respectively on these instruments.
"The market is looking to us for these rates. These are the rates that we are offering the institutional investors. Hence we decided to hike the coupon on the retail bond issue", said an ICICI official.
ICICI is presently offering 14 per cent on an annualised basis for 5 year resources to the institutional investors in the private placement market.
The face value of the bond is Rs 5,000 and investors have to subscribe to a minimum of one, two or three bonds depending on whether the coupon payment is annual, semi annual or quarterly.
Also on offer are three money multiplier bonds. The face value of the bond is Rs 4,000. The investors money would double in 64 months and the effective yield is 13.9 per cent as against 66 months and an effective yield of 13.4 per cent in April 98.
The investor also has the option of multiplying the investment 4 times over a period 125 months, an effective yield of 14.2 per cent as against 132 months or an effective yield of 13.4 per cent in April 98.
In addition the investor has the option of multiplying the investment 1.5 times over a period of 39 months, an effective yield of 13.3 per cent.
The third instrument offered to the investor is the tax saving bond. In April 98, ICICI had offered a 5 year tax saving bond under Section 54 EB at a coupon of 12.75 per cent. This time around, on offer is a 3 year bond under Sec 54 EA with a coupon of 12.5 per cent and a 7 year bond under Sec 54 EB with a coupon of 13 per cent.
One of the arrangers to the issue said: "The ICICI public issue is 25 basis points higher than the Rs 400 crore IFCI issue. IFCI had privately placed 5-year paper at 13.75 per cent and raised Rs 400 crore. The ICICI issue is a public issue and is targeted at the retail investor. It is priced higher as it reflects the hardening of rates on the longer tenor."
