Vodafone Idea’s Three-Year Bond Offloaded At A Steep Discount
A customer uses a mobile phone while leaving a Vodafone store in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Vodafone Idea’s Three-Year Bond Offloaded At A Steep Discount

A Vodafone Idea Ltd. corporate bond maturing in January 2022 was offloaded on Wednesday at a sharp discount to its face value.

The bond, bearing a coupon rate of 8.03 percent and a face value of Rs 100, was sold at Rs 54.28 a unit, according to NSE data. The bond, issued in January 2017, has an outstanding amount worth Rs 500 crore, Bloomberg data showed. The seller and buyer of the security wasn’t immediately available.

According to data available on the NSE, the Vodafone Idea bond worth Rs 40 crore with a residual maturity of about three years was sold at a 41 percent discount to its last traded price, which brings the effective yield to maturity at 42.9 percent. The bond, however, wasn’t actively traded. Its last trade was Oct. 17, 2018, at Rs 92.61 a unit.

This appears to be a panic sale by a non-mutual fund investor, and is likely to be a one-off trade, a fixed income manager at a domestic mutual fund told BloombergQuint on the condition of anonymity.

On Aug. 8, CARE Ratings Ltd. downgraded Vodafone Idea’s non-convertible debentures to CARE-A from CARE A+ with a negative outlook, citing further deterioration in the company’s operational and financial performance in the first quarter of the ongoing financial year. The company’s outstanding non-convertible debentures, as rated by CARE Ratings, stood at Rs 7,901 crore as on Aug. 8.

How yield on a corporate bond fluctuates in secondary market

A bond is issued by a company at face value, having a maturity of more than one year, and bearing a coupon—in case of Vodafone Idea, it was 8.03 percent. Bondholders have the option to sell it in the secondary market. Depending on the bond’s demand, it’s either sold at a premium to face value, implying high demand, or at a discount, indicating relatively lower demand.

Once the bond is sold in the secondary market, its yield to maturity either rises or falls. This is the yield that the buyer of the bond will receive if they hold it to maturity.

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