SSNNL bows to pressure, cancels May 28 meet

Buckling under pressure from market regulator Securities and Exchange Board of India, Bombay Stock Exchange and the investors, the Gujarat government-backed Sardar Sarovar Narmada Nigam Ltd on Friday postponed the May 28 meeting for seeking bondholders' approval for prepaying costly bonds.

The board of directors of SSNNL in a meeting on Friday decided to withdraw the notice for convening the bondholders meeting on May 28, an SSNNL release said.

"The decision was taken after considering representations and suggestions received as well as communication from Bombay Stock Exchange and SEBI," it said.

SSNNL's managing director has been authorised to issue a notice by public advertisement to the deep discount bondholders to inform them about the withdrawal of the notice.

It was also resolved that prior to the issue of fresh notice for holding the bondholders meeting, a record date and book closure would be fixed for determining the bondholders to whom such notice is to be issued.

The decision comes days after a group of investors under the umbrella of SSNNL Investors' Grievance Forum sought SEBI's intervention and moved the Delhi high court to stall the process of prepayment of costly bonds that could create asset-liability mismatch in many provident funds and cooperative banks.

However, SSNNL on Friday filed its reply and objection to the lawsuit defending its stance.

Provident funds and investors cried foul after SSNNL sent notices to bondholders informing them of its plan to redeem high cost bonds nine years before their redemption in January 2014.

SSNNL had issued the bonds bearing an interest rate of 17 per cent on January 1994, but did not provide for a "call option" to redeem it before 2014.

The company wanted to redeem the bonds, which were issued at Rs 3,600 per unit, at Rs 25,000 on January 2005 subject to the approval of bondholders.

SSNNL had sold the deep-discount bonds promising to repay Rs 1,11,000 on January 2014.

Investors had the choice to encash the bonds on the 7th year at Rs 12,500, or on the 11th year at Rs 25,000, or on the 15th year at Rs 50,000.

Redemption of the bonds on January 2014 would entail a whopping Rs 7,800 crore (Rs 78 billion) outgo for SSNNL while pre-payment at the 11th year would cost only about Rs 1,700 crore (Rs 17 billion).