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This document discusses secured premium notes, which are financial instruments issued by companies with detachable warrants that are redeemable after a set period of time. Secured premium note holders receive their principal amount plus interest in installments after the lock-in period, during which no interest is paid. The detachable warrants can be converted to equity shares if the secured premium notes are fully paid within a specific time. Tata Iron and Steel Co was the first to issue secured premium notes in India in 1992 to raise funds. Secured premium notes provide benefits to both investors and issuers - investors can receive high returns and convert to shares, while issuers do not face cash flow pressures from interest payments during the lock-in period.

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76 views9 pages

Presentation 1

This document discusses secured premium notes, which are financial instruments issued by companies with detachable warrants that are redeemable after a set period of time. Secured premium note holders receive their principal amount plus interest in installments after the lock-in period, during which no interest is paid. The detachable warrants can be converted to equity shares if the secured premium notes are fully paid within a specific time. Tata Iron and Steel Co was the first to issue secured premium notes in India in 1992 to raise funds. Secured premium notes provide benefits to both investors and issuers - investors can receive high returns and convert to shares, while issuers do not face cash flow pressures from interest payments during the lock-in period.

Uploaded by

manjunath hatagale
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Name: Manjunath M Hatagale

College Name: Brihan maharashtra college of commerce


Roll No: 238
Topic name: Secured premium notes
Professor name: Lanjekar sir
Secured Premium Notes
 Secured premium notes are financial instruments which are issued
with detachable warrants and are redeemable after certain period.
 SPN is kind of Non-convertible debenture(NCD) attached with
warrant ,It can be issued by the companies with the lock-in period
of say 4 to 7 years.
 SPN holders will get principle ammount with interest on
installments basis after lock-in period of said period, However
during the lock in period no interest is paid.
 The detachable warrants are convertible into equity share provided
the secured premium notes are full paid.
 The conversion of detachable warrant into equity has to be done
within the specific time.
 The warrant enable the holder to get equity share allotted provided
the secured premium notes are fully paid.
Secured premium notes- (SPN tata iron
and steel co)
(Tisco now changed its name to TATA steel
ltd) in 1992 and reliance tool the first step to issue this kind of
security TISCO issued SPN for the first time in india in the year 1992 to
rise 1212 crore SPN are issued as debt security with detachable
warrants these securities are redeemable after a period of 5 to 7 years.
Features:-
 SPN is hybrid securities i.e it combines both features of equity
and debts products.
 The conversion of detachable warrants into equity has to be done
within the specific time.
 After lock-in –period the holder has an option to sell back the
SPN to the co at par value.
 In case the holders keeps his investment further he is repaid the
principle ammount along with the additional interest /premium
on redemption in installments.
 TISCO (tata iron and steel co) took the lead in july1992 by making
a mega rights issued equity share and SPN.
Characteristics:-
Only listed co can issue secured premium notes.

A companie Issuing this instruments needs to get on approval


from the central government.

A SPN which comes with a warrant is detachable which means it


may be sold as a different instrument and hold no connection with
what is originaly was.

The time limit with in which the conversion can be made has to be
specified by the company.
Benefits of a Secured premium notes:-
To Investors-

The investors receives high rate of return the interest/premium


ammount is usually high.

It gives the investors an option to convert his SPN into equity shares,
Thereby becoming a shareholders.

The investors faces less tax burden as it comes under capital gain
and not regular income.
To Issuer:-

The issuer does not face any cash crunch as there in no fixed
interest payment during lock-in-period.

Repayment is made in installments which again do not piles up


pressures on the cash outflow of the companies.

An effective way to raise capital for project by requiring huge


investment.
Conclusion:

To meet its long term and shorts terms needs of finance


a companies may issue various kinds of secruities to raise funds from
public . A co may decide to issue securites because it needs start up
capital or to repay debts or even to expand.
THANK YOU

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