Sidbi Plans To Float Rs 800-1,000 Crore Bond Issue In Aug

Mumbai, July 30: | Updated: Jul 31 2002, 05:30am hrs
After posting a net-profit of Rs 72 crore in Q1 2002-2003, the Lucknow-based Small Industries Development Bank of India (SIDBI) will launch a Rs 800-1,000 crore capital gains bonds issue through the private placement route from August 1.

Outlining some of his priorities for SIDBI, its chairman and managing director PB Nimbalkar said that he plans to expand the role of the institution in both initiating developments with regards to small scale industry, venture capital and commercial activities.

With a capital adequacy of over 40 per cent the institution has gross non-performing assets (NPA) of Rs 700 crore while the net-NPA is estimated at Rs 300 crore.

Also, in its new role as a regulator of the state finance corporations, SIDBI has started appointing professionals as the chief of five state finance corporation and is waiting for the Centre’s decision on the GP Gupta committee report on restructuring state finance corporation to initiate any action plan for the effective functioning of the institutions.

Mr Nimbalkar described the financial health of the 18 state financial institutions of the country as not so good except state finance corporations of Delhi and Haryana. The Orissa State Finance Corporation (OSFC) has created a NPAs of over Rs 300 crore for SIDBI.

“The refinance to this state corporation is government guaranteed and we will see what we can do for recovering the loan from the state,” he said. The Bihar State Finance Corporation has a NPA of over 50 per cent.

SIDBI proposes to mobilise a major portion of its resource requirement in 2002-03 by offering two instruments of three and five year tenures with ‘put’ and ‘call’ options at the end of a three year lock-in period. Proceeds of the issue would be utilised by SIDBI for its business, he said.

The coupon rate of 7.5 per cent is payable on an annual or cumulative basis, he said, adding interest would be subject to change depending on the market condition.

The bond would be on tap basis and hence, would continue throughout the year. The minimum application amount will be Rs 10,000 and in multiples of Rs 10,000 thereafter. Non-resident Indians (NRIs), overseas corporate bodies (OCBs) and foreign institutional investors (FIIs) were also eligible on non-repatriation basis.

Mr Nimbalkar said this issue follows the announcement in the Union budget for FY-03 permitting SIDBI to extend the benefit of exemption under section 54 EC of the Income Tax Act to investors in the long term capital gains invested in bonds issued on or after April 1, 2002 with a three-year lock-in.