Those who had missed the bus in ICICI's Safety Bond issue in March 1997, get yet another opportunity to invest in fixed income instruments. However, compared to the earlier offering, the options and the returns that are to accrue from the current issue are much diluted as the coupons are generally 50 basis points less and there is no tax benefits under Sec 88.After its Rs 400-crore bond issue in March 1997, ICICI is now tapping the public with a Rs 300-crore bond issue with three schemes - Tax Saving, Regular Income and Money Multiplier bonds. However, the second tranche of the Safety Bonds from ICICI does not seem to be very attractive as the coupon is 50 basis points lower compared to the earlier offer. Nevertheless, considering that the short-to-medium term interest rates may not firm up in the recent future and also that there are hardly any other investment opportunities of the kind, the latest ICICI offer seems to be providing yet another entry point to the risk averse investors.
The Regular IncomeBond provides three options for investors with a maturity of five years. Under option-I, the minimum investment is Rs 15,000 and the coupon is now pegged at 12.75 per cent compared to 13.25 per cent in the first Safety Bond issue. Since the interest is paid quarterly, the yield works out to 13.4 per cent. The minimum investment in the second option is Rs 10,000 with an interest rate of 13 per cent per annum paid semi-annually (yield 13.4). Under the third option, yield is slightly higher at 13.5 per cent.
The Money Multiplier Bond provides only two options compared to three provided by the Safety Bond issue of March. The earlier bonds' yield was higher by 50-60 basis points compared to the yield offered by the bonds on offer. Under option-I, an investor can double his money in five and half years and the investment in the option-II will be quadrupled in eleven years.
The earlier Tax Saving scheme offered five options of investment as against only two being offered currently. The tenure of earlier TaxSaving bonds ranged from three, five and seven years. Also now the investors can not avail of the Sec 88 benefits. Under the first option in the present Tax Saving scheme which has 54EA benefits, the bonds will mature at the end of five years with an interest of 12.75 per cent. Depending upon the amount invested in the schemes and the tax bracket one belong to (which are 20, 40, 60 and 80 per cent), respective yields (including tax benefits) would be 13.9 per cent, 15.1 per cent, 16.5 per cent and 17.9 per cent respectively.
The second option has 54EB benefits. The investment under second option will mature at end of seven years. Given the coupon at 13 per cent payable annually, the yield works out to 18.3 per cent. The issue opens on April 27 and closes on May 19.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
