Mumbai, June 23: Nomura Securities, London has extended the closing date for India Debt Fund (IDF) to June 25. The fund, the country's first overseas debt fund floated by the Unit Trust of India, was expected to close on Monday.

The 10-year open-ended fund opened for subscription on June 12. Initial subscriptions to the India Debt Fund were in the region of around $50 million, against the lower targetted limit of $30 million. The upper end was $150 million.

While the fund hopes to close with a subscription of around $100 million, Nomura Securities will indicate the exact amount to be allotted to the investors after getting commitments for subscriptions over the next few days.

Sources say the extension of closing date was to accommodate some of the institutional investors from the South Asian markets. Investors to the fund have a lock-in period of three years, after which it becomes open-ended.

Subscribers to the India Debt Fund, will be alloted shares of India Debt Fund Inc, a Mauritian company set up for the purpose of avoiding double taxation. These shares will be listed on the Luxemborg Stock Exchange on Thursday whereafter they will be traded by international investors.

IDF Ltd, the Mauritian company has a board of seven directors, headed by GP Gupta, chairman, UTI. Others on the board are: BV Bhargava (former deputy managing director of ICICI), Pierre Tinan and Louis E. NG Cheong Tin (both independent citizens of Mauritius), John Edwards (independent lawyer of UK), Martyn Stewart Wells (former director Citicorp International, UK) and Robert John Owen (director, Nomura Securities, UK).

The money received from subscribers to the fund will be routed through the Mauritian vehicle to India Debt Fund, which in turn will invest in debt securities of Indian companies having AA (double A) credit rating and above.

The response to India Debt Fund could be considered as good, especially because it is the first attempt by any domestic mutual fund to tap international investors looking out for good return on fast-expanding domestic debt market.

However, there has been a sea change in the domestic interest rate, the corresponding debt market and the investment climate during the period between conception and launch. UTI had first decided in November last to set up a dedicated debt fund with an initial corpus of $100 million.

Since then the interest rates have declined by over 200 basis point to around 14.50 per cent for a AAA (triple A) rated paper.

Further, the till recently dormant equity markets have bouyed over the past few days, with the 30-share Bombay Stock Exchange sensitive index crossing the psychological barrier of 4,000. This indicates that the investors--both domestic and overseas--may once again be willing to look at the equity stocks that are known for better returns than debt securities.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.