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Monday, Mar 15, 2004

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Agencies active in buying fixed income papers of FIs

Nilanjan Dey

Kolkata , March 14

INVESTMENT advisory outfits are reportedly approaching investors in bonds of financial institutions and persuading them to sell their holdings to interested parties.

A good network of smalltime consultants are ready to offer a swift exit route to investors in select fixed-income securities. The idea that is driving them is simple enough: Convince people to move out of their investment early and secure on-the-spot cash payments. And, as investment circles point out, this has already created a `market' of its own.

A typical letter - one is in possession of Business Line - may read like this: "We buy ICICI Money Multiplier Bonds (Issue Price - Rs 4,000, Maturity - Rs 1,00,000 in 2022) for Rs 15,000... "

This, sources point out, is usually followed with an assurance that payments will be made right after a deal is struck. There are phone numbers and addresses, which investors may use for finding further details.

The practice, it is clarified, is not new in the country. However, it has lately assumed bigger proportions and has developed all the trappings of a trend, with operators in even small towns indulging in the practice. It draws sustenance from the fact that certain investors may not wish to hold their securities till maturity. In other words, they would rather exit at this stage by utilising the option being made available by the specialist agencies.

A number of these agencies are also interested in other fixed-income paper on a selective basis in addition to what has been issued by the FIs. As the letter at hand (sent by the Mumbai-based RM Shah Investment to an investor in Kolkata) puts it, the agency buys "all other series of ICICI and all government bonds"; it also promises payment in two forms - cash on the spot or draft against delivery at the investor's address. ICICI, incidentally, has repeatedly tapped the market with bond issues (including the so-called infrastructure bonds) in recent years.

Some of the people behind the development are clearly armed with databases.

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