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Flexibonds4 launched; IDBI to raise Rs 170 billion this year, 40 pc thru private placement

The Industrial Development Bank of India today launched four bond schemes as a first tranche of the IDBI Flexibonds4 issue.

The size of the issue is Rs 7.5 billion with an option to retain another Rs 7.5 billion (Rs 15 billion in all). The four instruments, in the nature of unsecured bonds and promissary notes launched are -- Regular Income Bond, Growing Interest Bond, Deep Discount Bond and Education Bond.

Speaking at the Flexibonds launch, IDBI chairman and managing director G P Gupta said the financial institution has issued an umbrella prospectus for the purpose of raising Rs 50 billion through public issue in more than one tranche to be raised during the current financial year.

''IDBI will launch the second tranche in December and the third in March to raise the remaining amount. The FI is also raising additional funds through a private placement that will be outside the purview of the Rs 50 billion to be raised by the Flexibonds4 issue,'' the IDBI CMD said.

Later, the IDBI sources said the institution plans to raise Rs 170 billion during 1998-99 for financing industry and projects. ''Around 40 per cent of these funds would be met through the private placement route,'' said the sources. They added that IDBI would also depend on internally generated funds to disburse fund to the industry.

Gupta said that IDBI has already collected Rs 42 billion through earlier issues of Flexibonds. ''A total of Rs 15.35 billion was mopped up in 1996, Rs 16.83 billion in 1997 and Rs 9.85 billion in early 1998,'' he said.

The issue is open for subscription from September 21 and closes onOctober 17. Like the earlier schemes of Flexibonds, IDBI is targetting the common investor for these schemes.

The Regular Income Bond offers an annualised return of 14 per cent for a period of seven years. The investor has an option to receive interest payments semi-annually or annually. If the investor desires, s/he can encash the bond at the end of the fifth year (in which case the annualised return will be 13.75 per cent).

The Education Bond is designed to help the investor meet expected future financial requirements on account of his/her children's education. The investor can opt either to receive five equal annuities from the end of fifth, seventh and tenth year.

When questioned whether the end use of this scheme should only be the child's education, an IDBI source informed that the investor is free to put the proceeds from his/her investment in anything he feels like apart from education.

The Growing Interest Bond has a built-in step up in the interest rates which rise from 11 per cent in the first year to 20 per cent in the seventh year. The investor earns increasingly higher yields for each subsequent year. In case he needs the funds, he can encash the bonds every year, after the first year from the deemed date of allotment.

The Deep Discount Bond is designed to make the investment of Rs 10,000 into Rs 100,000 after 17.5 years. The Flexibond4 issue is rated ''AAA'' by the Credit Rating and Information Services of India Limited.

UNI