The company's board also has the option to redeem another offering of Rs 341.54 crore during the year, which carries a coupon of 12.5 per cent, but it could not be ascertained at this stage whether the board will exercise the option anytime this fiscal.

The redemptions will result in around Rs 70 crore of interest saving which will have a direct bearing on the company's bottomline in the 1999-2000 fiscal.

The company will meet a major portion of the redemption from internal accruals as it is expected to generate significant cash flows during the current fiscal, with some analysts expecting a free cash flow in the region of Rs 1,400-1,500 crore.

As at March 31, 1999, its cash and bank balances totalled Rs 4,897.6 crore, according toReliance's latest annual report.

The redemptions will also be part-financed from the proceeds of the Rs 400-crore zero-coupon debentures raised by Reliance Industries last month to specifically retire high-cost debt to minimise interest costs.

The latest debenture issue was the first deep-discount bond offering since the interest rate cut, and the largest deep-discount issue by any private sector company to date.

The company, as a policy, has been redeeming its debenture issues over the years whenever they have come up for redemption and is expected to continue with the policy in the current fiscal as well.

Most of the debentures were issued in the first half of the decade when the company embarked on its mega capacity expansion plans at the Hazira petrochemicals complex.

The coupons on the five debenture offerings range between 12.5 per cent and 14 per cent with one offering of Rs 60 crore, of which only Rs 20 crore can be redeemed during the year, carrying the highest coupon of 18 per centcontracted by Reliance among all its existing debenture floats.

The remaining Rs 40 crore can be repaid by the company over the next two years in equal instalments.

The total interest outgo in case the company decides not to redeem the debenture offerings will be over Rs 120 crore. Since the last financial year, the company has been taking significant steps to reduce interest charges which have been high due to the huge size of its capital expenditure programme.

The move to redeem the debentures floats during the current fiscal follows similar measures taken by Reliance last year which included pre-payment of the high-interest institutional loans.

Its interest charges increased substantially in the 1999-2000 fiscal to Rs 728.81 crore from Rs 503.55 crore in the year before. The company has said that measures to optimise its interest costs will continue over the next few years.