MUMBAI, June 14: Reliance Industries Ltd (RIL) has privately placed Rs 50 crore worth of short-term non-convertible debentures (NCDs) linked to the Reuter Mumbai interbank overnight rate (RMIOR). The nine-month instrument carries a bullet repayment on March 15, 1999.This is third RMIOR-linked debt instrument launched in recent times. GE Caps was the first company to float such an instrument followed by L&T.
Unlike the GE Caps paper -- which offered a flat 400 basis points over RMIOR -- the coupon on the RIL instrument is capped at 15 per cent on a daily basis while the floor rate is pegged at 9.5 per cent.
The RIL paper has offered a "margin" of 300 basis points over the RMIOR. In effect it means even if the RMIOR shoots up beyond 12 per cent, for the purpose of computing the interest rate the RMIOR will be calculated as 12 per cent irrespective of the actual RMIOR. Similarly, even if the RIMOR dips below 6.5 per cent on a particular day, the floor for computation of interest rate will be kept at thislevel.
In the event that RMIOR is discontinued, the interest rate will be linked to some other benchmark like the Mumbai inter-bank offered rate (Mibor) or the State Bank of India term lending rate. The proceeds of the issue will be used by the company to meet its long-term working capital requirements. The sole arranger of the issue, which closed on June 10, was ABN Amro Bank. RIL will list the NCD on the National Stock Exchange.
A top RIL official told The Financial Express: "The response from the market was quite good in spite of its being a new market instrument and we were able to comfortably collect the Rs 50 crore."
According to him, the decision to fix a cap and a floor for the NCD issue is due to the fact that the secondary market for such call-linked products is not very developed. "As call rates are market-driven and highly volatile we have to provide for some kind of a hedge against unpredictable overnight call rates," he said.
The RIL issue, which opened on June 3, closed on June10. The deemed date of allotment of debentures is May 15. The face value of the debenture is Rs 1 crore each. The NCDs have been offered to financial institutions, banks, mutual funds, insurance companies and corporates.
As a security, the company has placed a second charge over moveable and immovable properties located at Patalganga with a minimum overall security cover of 1.33 times.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
