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This is an archive article published on August 14, 1998

ICICI ropes in ICICI Bank to sell encash bonds

MUMBAI, Aug 13: In the first exercise as a universal bank, ICICI will put to use ICICI Bank counters across the country to redeem the ins...

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MUMBAI, Aug 13: In the first exercise as a universal bank, ICICI will put to use ICICI Bank counters across the country to redeem the institution’s bonds.

Bondholders of the forthcoming seven-year maturity "encash bond" — to be launched on August 27 — are offered instant encashment of the prinicipal amount of the instrument after one year at ICICI Bank counters.

ICICI launches a Rs 300 crore bond issue — carrying 100 per cent greenshoe option — on August 27.

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The encash bond offers a stepped-up interest rate structure where the coupon for the first year will be nine per cent and at the end of the seventh year it will be 18 per cent.

The investor will get back his principal amount on the same day in any of the 30 I-Bank branches across the country. This will remove all doubts of any illiquidity for investors. Cash will be available to the investor in case of emergency," ICICI sources said.

The encash bond is offering a yield of 14 per cent for seven years while the coupon for the "regular incomebond" — another instrument on offer — has been pegged at 14 per cent for the same tenure.

"We did not want to go for a regular five-year paper for the simple reason that we would be offering around 13.25-50 per cent for a five-year paper now and no investor will not go for such a low coupon paper," sources said.

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ICICI is offering tax-saving bonds under Section 54 E (A) and E (B) which will provide exemption to the investor from capital gains. The institution will become the first entity to launch a tax-saving bond under Section 88 of the Income Tax Act. It is offering 12.5 per cent coupon for three years to investors who want to seek exemption under Section 88.

It will also offer a "money multiplier bond" where Rs 4,000 will become Rs 1 lakh after 24 years and two months. The yield works out to 14.2 per cent. There is another type of bond also being offered where Rs 4,000 grows to Rs 6,000 in three years and three months. The yield in this case works out to 13.3 per cent.

ICICI mopped up Rs 504crore through the previous tranche of "safety bonds" launched in July.

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