MRPL: Buy and hold till maturity

Recommendation: Buy and hold till maturity

Reshma Krishnan

Manglore Refineries and Petrochemicals issued this partly convertible bond in May 1992 at an issue price of Rs 135.

After conversion, the bond had a face value of Rs 76 and became a non-convertible debenture (NCD). The bond is redeemable annually at par in four instalments of Rs 19, starting from July 1999 with the final redemption in July 2002. The NCD's face value is Rs 38. It has a high coupon rate of 16 per cent and the interest is paid semi-annually.

The bond traded at Rs 40-41 till the middle of this month after which the market factored in the redemption due in July 2001. The bond is fairly liquid compared to other bonds, and trades at Rs 19.10. Its yield to maturity calculated on the current market price, stands at 14.90 per cent. This does not take into account the transaction costs. After costs, the probable return will be 11.40 per cent. This is at least 1.50 per cent more than what most banks offer for their fixed deposits. Therefore, investors willing to hold till maturity should consider the bond as the returns are attractive at current price levels.