Business Daily from THE HINDU group of publications
Sunday, Jan 04, 2009
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Business Daily from THE HINDU group of publications Sunday, Jan 04, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Corporate
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Corporate Bonds Markets - Investor Protection Web Extras - Regulatory Bodies & Rulings Our Bureau Mumbai, Jan. 3 The Securities and Exchange Board of India has directed Sardar Sarovar Narmada Nigam Ltd (SSNNL), the nodal agency implementing the Sardar Sarovar project, to provide the approach and justification for arriving at the price of Rs 50,000 for early redemption of its deep discount bonds. SEBI has also directed SSNNL to inform all the bond holders about the approach and justification to arrive at the redemption price. SEBI has asked the company to provide this information before January 8. SSNNL had issued the bonds in November 1993 at a discounted price of Rs 3,600, carrying an interest of 17 per cent. After 20 years, in January 2014, the bond holders could, thus, have expected a redemption amount of Rs 1,11,000 a bond. However, the company’s board of directors on November 3, 2008 had decided to redeem the bonds earlier and had fixed the date for redemption as January 10, 2009, with the deemed face value of Rs 50,000 a bond. The company’s decision follows the passing of an Act by the Gujarat Government earlier last year, which provided an option to the company to redeem the bonds at an earlier date. Trade barThe company has also asked bond holders not to trade in the bonds from December 13, 2008 to January 10, 2009 for the purpose of determining the names of the holders and their holding for payment of the redemption amount. This is its second attempt at pre-mature redemption of the bonds. In 2004, the company had attempted to redeem the bonds, but had to shelve the plan as it did not follow certain procedural norms. Even the latest SEBI letter to the company, issued on January 2, 2009, pointed out that “SSNNL had proposed to prematurely redeem the bonds in 2004. SEBI had then advised SSNNL to convene a meeting of bond holders and to obtain their consent. It appears SSNNL did not do so and shelved the proposal.” SEBI said it had received complaints from several investors and investor associations against the premature redemption of the bonds on January 10, 2009. ‘Consent not taken’It noted that even this time around, it appeared that “consent of the bond holders, as well as that of SEBI, which supervises the issue and trading of bonds, have not been taken.” While the Act sets the floor price for redemption, SSNNL has not indicated the approach followed to arrive at the redemption price or the justification of the price in relation to prices at which the investors have been transacting in the bonds in the secondary market. A senior official of the company told Business Line that the SEBI letter was being examined and a reply will be issued within the stipulated time. He also said that the company was going ahead with the redemption at the price of Rs 50,000. “The redemption price is based on the interest rate and there will be no loss to any of the bond holders after redemption,” he added. More Stories on : Corporate Bonds | Investor Protection | Regulatory Bodies & Rulings
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