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June 25, 2001
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Money > Business Headlines > Report June 25, 2001 |
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IDBI plans to call back bonds worth Rs 100 billionGeorge Smith Alexander The Industrial Development Bank of India is planning to call back Rs 100 billion worth of bonds, placed with banks and institutions, during the current financial year to cut down its high cost borrowings. Confirming the development, a senior IDBI official said talks are on with banks and financial institutions to redeem a series of Omni bonds-privately placed with the institutions-ahead of their maturity. "These bonds do not have any call options. Some of the corporates have prepaid their loans and correspondingly we are trying to reduce our costs by redeeming these bonds. Otherwise, our asset liability management will be affected," the official added. IDBI may offer a small premature redemption premium to the institutional bondholders since the instruments do not have call or put options. The transactions will be cash neutral as IDBI will replace the high yielding bonds with the relatively low coupon papers. IDBI had earlier redeemed the deep discount bonds sold to retail investors by exercising the call option. The institution has kicked off its first round of talks with the banks and institutions on the redemption of these bonds. "The Omni bonds carry a coupon of around 13-14 per cent. Also, some of the bonds with a higher coupon of 15 per cent have also been placed with the institutions. IDBI may offer some incentives to encourage the institutions to accept the offer," the official said. In the normal course, these bonds would have around another 2-3 years of maturity left. "By the premature redemption of these bonds, we will be able to save around 2-3 per cent on interest costs. This will translate into savings of at least around Rs 2 billion per annum," said the official. The institution is looking at prematurely retiring these borrowings as it plans to cut down its cost of borrowings. IDBI is focussing this year on boosting its bottomline through cost cutting, premature retirement of high cost borrowings, reducing issue expenses and going in for demat issues to skirt stamp duty. IDBI redeemed bonds of more than Rs 37.29 billion in fiscal 2000. This measure itself is set to increase the FI's bottomline by Rs 2 billion in the current fiscal. Powered by YOU MAY ALSO WANT TO READ:
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