NTPC issues largest ever bonus debentures worth Rs 10,307 cr

NTPC, the state-owned thermal power generator, has issued bonus debentures of Rs 10,307 crore, the largest ever by any Indian company.

It is also the first public sector company to adopt this instrument to reward shareholders, said its executives.

After shareholders’ approval, the ministry of corporate affairs approved the scheme, for issue of secured bonus debentures of a face value of Rs 12.50 each for every one equity share of Rs 10.

According to K Biswal, director (finance), the return on equity for the company would improve, besides bringing down the weighted average cost of debt.

The board of directors had approved the scheme last December.

The company proposes to list the debentures on the BSE and the National Stock Exchange, providing flexibility to shareholders to monetise the security during its life. The stock jumped to a 52-week high after the announcement.

The debentures will be redeemed at the end of the eight, ninth and tenth year, in the ratio of 20 per cent, 40 per cent and 40 per cent of the face value, respectively.

“Thus, the reward does not entail an immediate cash outflow for the company,” said Biswal.

An issue of bonus debentures turns accumulated free reserves into debt for a company. The instrument is not frequently used by Indian companies. Last year, Blue Dart came up with such an issue. So did Britannia Industries in 2009 and Dr Reddy's Laboratories in 2010.

NTPC Limited