With the success of this issue, IDBI has been able to create a benchmark, and all other issues will be priced in relation to it. The premier financial institution has been able to raise funds despite forecasts that the issue will fail as interest rates were moving northwards. S.H. Khan, chairman and managing director, IDBI had maintained that the institution was not facing any problems in raising the funds.
IDBI has decided to close the issue when subscriptions touch Rs 500 crore, and not go in for the green shoe option of Rs 500 crore. IDBI has a total fund requirement of Rs 11,000 crore in the current year. Out of this, Rs 500 crore has already been raised by the private placement issue.
According to IDBI officials, the plan is to raise funds every quarter. Out of the Rs 11,000 crore, IDBI will raise nearly 30 per cent or Rs 3000 crore through its Omni bond issue. These are triple A rated on tap bonds, and entities with surplus funds can buy these bonds.
With Rs 500 crore being raised at 13.5 per cent by IDBI, the institution has set a benchmark. In fact, officials at ICICI maintain that they have been tracking the IDBI issue very closely as they will also have to enter the market shortly to raise funds. The last issue of ICICI was the 16.25 per cent debt floatation.
Sources point out that interest rates have bottomed out and will stay at these levels unless there is fresh impetus given to the financial system. "The deposit growth is still on, and the credit offtake is not picking up. Until that happens, the rates are unlikely to go up," say bankers. Even though there has been resistance from investors, issuers like Reliance have been able to raise funds at 14.5 per cent. IRFC also mopped up Rs 900 crore from the market at a coupon rate of 14.25 per cent. In fact, six days before the issue closing, even IPCL has been able to raise around Rs 150 crore at 14 and 14.25 per cent, merchant bankers point out.
Says a merchant banker, "IDBI has shown that cheap money can be raised.
Now where the interest rates go will be determined by the stance of the commercial banks.
