Religare Finvest Limited is tapping the bonds market with an issue of Rs 400 crs and an oversubscription of Rs 400 crs, making the total size of the bond issue Rs 800 crs. The bond issue will be of two maturity periods of 3 years and 5 years. The coupon rates will vary from 12% to 12.5% depending upon the category and the duration. As ofdate this is the highest coupon rate being offered by any issuer in the AA- category of rating. This has probably being done keeping in mind that RBI is likely to revise interest rates in their meeting on Friday the 16th of September. The issue has opened on Friday the 9th of September and would close on Monday the 26th of September or earlier.
| Issue Size | Rs 400 crs plus oversubscription Rs 400 crs – Total Rs 800 crs |
| Period of Bond | 2 options of 3 years and 5 years |
| Coupon Rate Category I | 12% per annum and 12.10% per annum |
| Coupon Rate Category II | 12.15% per annum and 12.25% per annum |
| Coupon Rate Category III | 12.25% per annum and 12.50% per annum |
| Category I or Institutional Portion | QIB’s |
| Category II or Non-Institutional Portion | Bodies Corporates and Firms and HNI’s who apply above Rs 5 lacs |
| Category III | Resident Indian Individuals and HUF’s – application to be above 5 lakhs |
| Category III Reserved Portion | Resident Indian Individuals and HUF’s – application to be upto 5 lakhs |
| Reservation Category I | 20% of issue or upto 160 crs |
| Reservation Category II | 30% of issue or upto 240 crs |
| Reservation Category III | 50% of issue or upto Rs 400 crs |
| Lead Managers to the Issue | A K Capital Services Limited |
| Axis Bank Limited | |
| Yes Bank Limited | |
| Religare Capital Markets Limited | |
| Isssue Opening Date | Friday 9th September |
| Isssue closing date | Monday 26th September |
| Credit Rating | ICRA AA-(Stable) and CARE AA- |
| Bid Lot | 10 bonds |
| Bidding Amount for Retail | 500 bonds of Rs 1000 each or 5 lakhs |
| Listing of Bonds | Bombay Stock Exchange |
| Interest on Application | 8% per annum on application |
| 8% per annum on allotment | |
| Allotment | On first come first served basis |
The company ReligareFinvest Limited is a subsidiary of the listed entity Religare Enterprises Limited. The market capitalisation of the listed entity is Rs 5716 crs. As of now on a consolidated basis the listed entity is a loss making company and reported net losses of Rs 295 crs for the year ended March 2011. As far as the company raising the bonds or issuing the bonds is concerned it is a healthy profit making company and made a net profit of Rs 114.77 crs for the year ended March 2011.
The brief financials of the company show that the total income in the year ended March 2010 was Rs 536.16 crs which has more than doubled to Rs 1,163.15 crs in the year ended March 2011. The net profit during the same period has grown from Rs 102.82 crs to Rs 114.77 crs.
There is a very strong belief that the interest rate cycle is almost at its peak and probably after the last round of interest rate hikes in the next week, there is every likelihood that there would be no further rate hikes and gradually there could be some easing as well. Considering this general consensus feeling all over it would be fair to assume that for investors this would be a great opportunity to invest in bonds with a coupon rate of 12.5%. Once the interest rates start easing these instruments would trade at a premium and help in making some more money. One may also remember that the current situation in the equity markets is also not very conducive and making money is difficult to say the least. In such trying circumstances it may be a good idea to invest in the bond issue and when the markets start improving and interest rates start easing to sell the bonds and enter the market.
SEBI Disclaimer: – I intend to apply to the above bond issue.
