SSNNL starts bond redemption process, refuses to divulge details

The Sardar Sarovar Narmada Nigam Ltd (SSNNL), which had received a notice four months ago from the Securities and Exchange Board of India (SEBI) to explain the redemption price of its deep discount bonds by January 10, 2009, has since started the redemption process.

However, the SSNNL is not willing to disclose the number of bonds redeemed this year and at what rate. SSNNL finance wing official, H K Patel, told Newsline on Monday that the Nigam had sent a reply to SEBI, which the latter had found satisfactory. He, however, refused to divulge the details of the reply. All he said was that the process of redemption was in progress since January 10, 2009, the date SEBI had fixed for it to notify bond holders of the calculation of redemption price.

In 2008, the state government came up with a legislation making redemption mandatory for all bonds by January 2009, at a deemed face value of Rs 50,000 per bond. The Sardar Sarovar Narmada Nigam (conferment of power to redeem bonds) Act, 2008, modified the prospectus "with retrospective effect conferring the call option on the company", according to a SEBI communication.

The bonds were issued through a prospectus dated September 29, 1993, without any mention of a call option. They were issued at a discounted price of Rs 3,600 at an interest of 17 per cent payable in slots of 7, 11, 15 and 20 years. Thus, a bondholder could expect Rs 1, 11,000 per bond after 20 years (in January 2014).

While the change in legislation is "not obligatory", Sardar Sarovar has decided to redeem the bonds before maturity without the consent of the bondholders. Indian Oil Corporation (IOC), Steel Authority of India (SAIL) are some of the bondholders who subscribed to the bonds at issue price or purchased them from the secondary market at a price based on the earlier prospectus.

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