A Delhi High Court ruling last week has given a shot in the arm to deep discount bond (DDB) holders of Sardar Sarovar Narmada Nigam Ltd (SSNNL). The court ruled that the DDBs can file a fresh petition in the court if SSNNL makes any fresh move to redeem the DDBs early.
More than 4.5 lakh investors have invested their money in these bonds. While SSNNL had issued an early redemption notice in April 27, 2004, it has not pursued the issue since.
SSNNL managing director SK Mohapatra, however, said, “A similar ruling has been given by the Gujarat High Court. The judgment is not against us and it does not prevent us from making such a move in the future.”
The Nigam had issued a notice to its bondholders 10 months ago to pass a special resolution authorising the company (SSNNL) to have an early redemption option. The move became controversial as the offer document did not have any such provision.
The aim behind early redemption was to get rid of the high interest burden as the rate of interest prevailing at the time of issue (in 1993) was around 17% and 11 years later interest rates had fallen to as low as 8-9%.
Following the early redemption notice, the then ruling price of the bonds (in April 2004) crashed from Rs 43,000 (on April 8, 2004) to around Rs 28,000 (on May 4, 2004).