ICICI is tapping investors with its third tranche of safety bonds. The issue is still relatively attractive as there are still no signs of bank deposit rate hike for maturities of one year and over. It is also not clear whether short-term rates will go up across the board in the banking sector. On the contrary, the inflow of money from the Resurgent India Bonds could add to the liquidity in the economy, easing pressure on short-term interest rates.

Consider this: If the State Bank of India is in a position to collect $ 3 billion, it will mean an inflow of over Rs 12,000 crore. This against the Rs 5,000 crore that would be sucked out from the banking system following the one per cent hikein the CRR. The only additional pressure could come from the rising inflation rate. As such the chances of medium-to-long-term rates shooting up is limited now. However, investors will have to compare deposit rates offered by banks for one year maturity while investing in ICICI's bond for similar maturity.

ICICI is now offering its third tranche of safety bonds. ICICI is raising Rs 300 crore of unsecured redeemable bonds with a green shoe option of up to Rs 300 crore. ICICI is offering the safety bonds with four flavours -- Encash bond, tax saving bond, regular income bond and money multiplier.

Encash bonds: The bonds which will be redeemed in seven years, provide easy liquidity to the investors. Although the redemption period is seven years, investors can exit from these bonds after locking the money for one year. The scheme provides a coupon of 9 per cent for the first year, 13 per cent for the second year, 14.5 per cent for the third year, 15.5 per cent for the fourth year, 16.5 per cent for thesixth year and 18 per cent for the seventh year. The minimum investment is Rs 5,000.

Tax saving bond: Those investors who are looking for tax benefits can pick up tax saving bonds. The investor can enjoy tax benefits under Section 88 and Section 54 EA and EB. The investor has four investment options. The first option (with Section 88 benefits) provides investors a coupon of 12.5 per cent and the bonds have a redemption period of 3 years. The total yield (including the tax benefits) on an investment of Rs 5000 works out to 22.3 per cent. For the zero coupon bond, the second option (which also has Section 88 benefit), the yield to maturity work out to 12.6 per cent. The face value is Rs 7,350 and the issue price is Rs 5,000. The yield (including tax benefits) works out to 20.6 per cent and the redemption is after 39 months. The third investment option has the tax benefit of Section 54 EA. With a redemption period of three years, the bonds (both issue price and face value at Rs 5000) have a coupon of12.5 per cent. Under the scheme, if an investor re-invest 20 per cent of the capital gains, the yield will work out to 14.2 per cent, 16.1 for 40 per cent, 18 per cent for 60 per cent and 20.1 per cent for 80 per cent.

The fourth option has Section 54 EB benefits. With a maturity of seven years, the coupon is 13 per cent. The yield to the investor works out to 18.3 per cent.

Regular Income Bond: The scheme with three investment options provides a stream of regular income. The first option with a minimum investment of 15,000 has a redemption period of seven years.

The coupon on the bonds is fixed at 13.25 per cent which will be paid quarterly. The yield to the investor is 13.9 per cent. The investor has to put in a minimum of Rs 10,000 under the second option of Regular Income Bond. The bonds with a maturity of seven years have an interest rate of 13.5 per cent which will be paid semi-annually. The yield works out to 14 per cent. The third option with a minimum investment of Rs 5000 has coupon of14 per cent paid annually.

Money Multiplier Bond: The first option provides one and half times of the money invested at the end of the redemption period of 39 months. The yield to the investor works out to 13.3 per cent.

Under the second option, the money will be multiplied by four times after a period of 10 years seven months. The yield is 14 per cent. The third option multiplies the money invested by 25 times in a period of 24 years and two months. The yield will be 14.2 per cent.