Skip to main content

3 bonds & 1 IPO target Rs 9,986 cr retail funds

SBI, IDFC, L&T arm and CIL will tap the market this week

 
THREE retail bond issues and one mega IPO will compete with each other to attract investors this week by offering them Rs 9,986 crore worth of investment options.

The initial public offering (IPO) of Coal India will vie for funds with bond issues from SBI, IDFC and L&T Infrastructure Finance.

Through retail bonds, SBI aims to raise Rs 1,000 crore, while IDFC is targeting Rs 3,400 crore and L&T Infrastructure Rs 700 crore.

The retail component of Coal India IPO will be about Rs 4,886 crore.

SBI promises an interest rate of 9.25-9.5 per cent on a 10-year bond and an additional interest of 0.5 per cent if investors continue for another five years.

"We believe there will be large retail investor appetite for the bond issue as we are offering a very attractive interest rate of 9.5 per cent for 10 years. In fact, we hope to increase the frequency of such retail bond issues every quarter so that the bank is able to have long-term funds," OP Bhatt, chairman and managing director of State Bank of India (SBI), told reporters at a

press conference while launching the retail bond issue.

The SBI bond will yield 200 basis points more than the 10-year fixed deposit of the bank.

Prithvi Haldea, chairman and managing director of Prime Database, said retail investors had put money in savings accounts and fixed deposits, and were waiting for an opportunity for better returns.

"Reliance Power, which has no projects on stream and no revenues to show, managed to attract 46 lakh retail investors who put in Rs 39,900 crore into the IPO. The retail portion was oversubscribed 14 times. If an issue is well planned with the right pricing, it will have ample takers," he said.

While the infrastructure bonds issued by IDFC and L&T are tax free, SBI bonds are taxable. IDFC bonds offer an interest rate of 7.5-8 per cent a year for 10 years, while L&T bonds offer 7.5-7.75 per cent.

The IDFC bond issue, which opened for subscription on September

30, is generating investor interest from nearly 32 cities.

"We extended the bond subscription period by another five days as the Sebi clearance for the issue in non-demat form came only this week. After this, we are seeing a lot of interest in smaller cities like Indore, Baroda, Surat and Coimbatore," said a senior IDFC official.

manjuab@mydigitalfc.com COAL India's Rs 15,000 crore mega issue, which opens for public subscription on Monday, has garnered a bullish endorsement from most market experts who believe it would be the star attraction of the week for all, including retail investors.

"This week the main attraction for retail investors will be the primary market with the mega IPO of Coal India slated to open on Monday," said Saurabh Jain, research head (retail) at Delhi-based SMC Global Securities.

CIL's IPO, priced in the range of Rs 225 to Rs 245 a share, is the biggest issue in India's history so far. The offering closes on October 21. For qualified institutional buyers, which include FIIs, insurance firms and mutual funds, the IPO will close on October 20.

Analysts said the issue will be important not only for the primary markets but also to secondary market participants, who will be watching it closely. In fact, such was the momentum to stock up cash for the CIL issue that in just two sessions BSE benchmark Sensex sank a whopping 500 points.

Besides, there will be some short-term pressure in the money market, as experts believe there could be a total liquidity impact of roughly about Rs 150,000 crore during this IPO.

"The liquidity tightness during a large IPO occurs as a result of the fact that many bids are financed through borrowing. This leverage shows up as a temporary expansion in the credit during the IPO period," Axis Mutual Fund said.

Brokerage house CLSA said, "CIL deserves to trade at a premium to global coal peers given much lower volatility of earnings and large headroom to raise prices in a supply deficit environment."

CIL is one of the largest companies in the world based on the coal reserves of 64,786 million tonnes.

 


Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...

Equity investors should track market developments

The stock markets have been volatile over the last few days. They are in a sideways movement and trying to find the bottom after a fall of 20 percent a week ago. The market sentiments are not very positive at the moment and the recent developments are expected to dampen them further. Globally, governments and central banks are trying to cut rates and announce packages to improve business sentiments. These are some of the major developments in the markets last few month: A) Global On the global front, another large US bank went into a financial crisis. The US government took quick measures to avoid the spread negative sentiments in the markets. The US government announced a bail-out package and agreed to shoulder the losses on the bank's risky assets. China announced a large cut in interest rates and reserve ratio to boost the investor sentiments in the markets. Recently, the World Bank announced China's growth rate next year will come down to 7.5 percent. The European ...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now