The Industrial Development Bank of India (IDBI) has sought Securities and Exchange Board of India (Sebi) "umbrella" approval for a Rs 5,000-crore retail bond issue. The move comes within a week of Sebi granting umbrella approval for ICICIs Rs 3,000-crore retail bond issue.
Senior IDBI officials confirmed they have applied to Sebi and added that the issue will be named as Umbrella Flexibond. IDBI, in its prospectus filed with Sebi last Friday, has sought clearance for 10 innovative instruments," said sources from the institution.
The ten instruments filed with Sebi include Infrastructure Bond, Regular Return Bond, Deep Discount Bond, Growing Interest Bond, Multi Option Bond, Gift Bond, Education Bond, Retirement Bond, Inflation Index Bond and Floating Rate Bond.
While Sebi is in the process of drafting guidelines for the umbrella issue, the two leading institution have taken a lead in using this concept as a tool to hit the retail capital market as per their convenience, market sources said. The next financial year will see both the institutions using the umbrella issue as the main instruments to meet their resources needs, they added.
Both- IDBI and ICICI have not yet fixed any interest rate bands on their umbrella bond issues. Interestingly, IDBI has received the Central Board Direct Taxes approval to raise the entire sum of Rs 5000 crore under the tax exemption scheme, while ICICI would seek CBDT's clearance for the tax exemption every time it raises funds from the retail bond market.
The Infrastructure Bond, Deep Discount Bond, Growing Interest Bond are similar to IDBI's Flexibond issue, while the Inflation Bond will be similar to the Capital Index Bond issued by RBI.
IDBIs Floating Rate Bond will be linked to the interest rate offered by the State Bank for five year fixed deposit or five year government securities rate- which ever is higher and will be reset every year. The Multi Option Bond with a maturity of five years has the option of giving investors to select their cash flow, while the Retirement Bond will have a wait period of some years followed by annual or monthly interest warrants.
