ICICI cuts bond rates proactively - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

ICICI cuts bond rates proactively

Mar 14, 2000

ICICI Ltd. has reduced interest rates for its forthcoming bond issue by 50-70 basis points as compared to its last safety bond issue in February. The regular income bonds for this issue carry a coupon rate of 10.6% as compared to 11.25% offered for the same bonds by ICICI in its February issue. ICICI is India's second largest institution, with a major presence in almost all areas of finance. The company has an asset base of Rs 585 bn.

This is ICICI's seventh bond offering in the current fiscal year. As ICICI had borrowed at rates higher than this in the earlier part of the year it could well be that they could use the funds from the forthcoming issue to finance the call option of the earlier series of these bonds i.e. to redeem bonds issued at higher rates of interest.

As interest rates have been falling in the last couple of months especially after the credit policy in October and the cut in provident fund rate to 11% in January, ICICI could be taking advantage of the fall in interest rates to pare down its high cost debt raised earlier.

There has been much speculation in the finance and banking circles of a reduction in bank rate after the rate cut on PPF. However the bank rate is affected by many other factors like inflation, credit growth, government borrowing and liquidity in the banking system and not just the rates offered on PPF. Some bankers feel that as interest rates have already come down in the last couple of years (from a PLR of 16.5% in 1995-1996 to 12.5% currently) a further cut would lead to a squeeze in margins, as the decline in deposit rates may not be commensurate with the reduction in the lending rates.

ICICI however has reduced its bond rates on its own without contemplating on the bank rate cut expected in the credit policy. ICICI has been very aggressive in reducing its borrowing cost in the last few years. In fact ICICI was the only institution to have responded with interest rate cut after the government reduced the PPF rate to 11% in January. Financial institutions borrowed at higher rates than banks in the past, however this now seems to be changing.

Market View:
ICICI has been rated a 'BUY' by many analysts due to its restructuring, its high spends on technology and manpower which has helped it retain quality manpower and its aggressive retail expansion.


Equitymaster requests your view! Post a comment on "ICICI cuts bond rates proactively". Click here!

  

More Views on News

How the YES Bank Collapse Unfolded - 10 Points (Sector Info)

Mar 9, 2020

A timeline of how YES Bank went from a stock market darling to a pariah.

Today's Stock Market Crash: 10 Points (Sector Info)

Mar 6, 2020

Top factors that dragged the markets lower today.

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

TRACK ICICI

MARKET STATS