In what could throw awry financial plans of lakhs of investors, the Gujarat government-backed Sardar Sarovar Narmada Nigam Ltd said it would prepay high cost bonds to save about Rs 6,100 crore (Rs 61 billion).
To get the consent of investors, SSNNL has called a meeting on May 28 as the 17 per cent interest bonds, issued in January 1994, did not provide for pre-mature redemption by the issuer.
In case SSNNL failed to get the consent of bond-holders for the early redemption, it would have to entail a liability of Rs 7,800 crore (Rs 78 billion) till 2014, SSNNL managing director S K Mohapatra told PTI on phone from Gandhinagar, adding the pre-payment in the 11th year would cost only about Rs 1,700 crore (Rs 17 billion).
"We have sent notices to the bondholders about the meeting to amend the conditions of the bond so as to obtain the call option and redeem the bonds in the 11th year," Mohapatra said.
He said the company hopes to redeem the bonds at Rs 25,000 in January 2005 subject to the approval of bondholders.
SSNNL had sold the deep-discount bonds at Rs 3,600 per unit in January 1994, promising to repay Rs 1,11,000 in January 2014. This would entail a cash outgo of about Rs 7,800 crore for SSNNL.
Investors had the choice to encash the bonds in the 7th year at Rs 12,500, or in the 11th year at Rs 25,000, or 15th year at Rs 50,000.
"The deep-discount bonds were issued in a high interest regime in 1994 at 17 per cent. These rates have now become historical and anachronistic, especially for an organisation developing public infrastructure," Mohapatra said.
"If we can retire high cost debt, why not go for it," he said, referring to the decision to prepay the bonds on 11th year.
Asked why SSNNL decided to prepay its debt at this stage when interest rates have started coming down, he said, "Better late than never."
Expecting cooperation from bondholders, Mohapatra said: "We hope the system will allow us if we want to do something logical."