The Hindu Business Line : SSNNL bondholders' meet in Sept likely for buy-back

THE Sardar Sarovar Narmada Nigam Ltd (SSNNL), forced to postpone a meeting of its 4.5-lakh deep discount bond holders on Friday following a SEBI directive on Friday last, may now be eyeing a September meeting to insert a call option to buy back its bonds at around Rs 1,700 crore.

Talking to Business Line, top brass of SSNNL said that it had no option but to buyback the costly bonds as the Gujarat Government was determined to ensure reduced liability of the Narmada project.

The way things were being worked out in the SSNNL headquarters is that it would require 21 days for a notice on book closure and another 30 days for convening the bondholders' meeting.

As the month of August would be inopportune with the monsoon session of Assembly for a massive gathering of Narmada bondholders in the State capital, indications are that September would witness the passing of a resolution to insert the call option to prematurely redeem the deep discount bonds.

However, SSNNL is still mulling the option of going the length with the bond till maturity in January 2014, but with a reduced coupon. In which case, all these constraints, including the one that requires a three-month lead time before the put option in January 2005 would not hold good.

If SSNNL opts to traverse the latter route, then the effort would be to shave the coupon to such levels that it remains more or less on par with prevalent bond rates.

"The bond issue will be shaped by three factors. Just as one is looking at the two court cases pending at the High Courts of Delhi and Gujarat on the issue, one would also be bound by the procedural requirements in inserting a call option. There is no way that SSNNL can afford to pay an interest rate of 17 per cent to the public when the average coupon on Narmada bonds raised from the market now stands at 8.5 per cent or even less," said Mr I. P. Gautam, Director (Finance), SSNNL.

The deep discount bonds issued in January 1994 at Rs 3,600 came with three intermediate redemption options at Rs 12,500 in 2001, Rs 25,000 in 2005 and Rs 50,000 in 2009 before its maturity at Rs 1,11,000 in 2014. The SSNNL, which has been retiring costly market borrowings over the past 11 years at rates as high as 15 per cent by issuing fresh bonds at around 8.5 per cent, was counting on the same strategy giving results in the deep discount bond issue as well.

"The SEBI directive of May 19 has not disputed the legality of the proposed meeting but only asked us to fix a book closure date so that actual bondholders of the bonds could get to vote on the agenda of varying the terms of issue of the bonds. The SSNNL board of directors will now meet to decide on the book closure date as one has to find a way out of the impasse created by the structuring of the bonds that were shaped to discourage mid-term redemption," said Mr S.K. Mohapatra, Managing Director, SSNNL.

Surely, it will take some persuasion before some 4.5 lakh Narmada bondholders agree to give up their claim on a return as lucrative as a cool 30-fold growth on investment over a 20-year period.

Given the political storm that is brewing in Gandhinagar these days, it will call for some bold decisions from the SSNNL brass to avert the financial catastrophe of having to shell out almost Rs 7,800 crore in 2014 to the bondholders. Not that Rs 1,700 crore would be easy to find in January next but then SSNNL can always fall back on the safety net of yet another bond issue or perhaps even a public issue.