NAKED WARRANT

Today's word: NAKED WARRANT
Theme for this fortnight: BONDS

 

A warrant that is issued without a host bond. A naked warrant allows the holder to buy or sell a particular financial instrument, such as a bond or shares, but unlike a normal warrant, it is not sold with an accompanying bond. Naked warrants are typically issued by banks or other financial institutions that are not also issuing a bond, and can be traded in the stock market.

Normal warrants are issued with an accompanying bond (a warrant-linked bond), giving the investor holding the warrant the right to exercise it and acquire shares of the company that issued the underlying bond. The company writing the bond is typically the same company issuing the underlying bond. Naked warrants, on the other hand, can be backed by a variety of underlying investments, including stocks, and are considered more flexible.

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DRAGON BOND

Today's word: DRAGON BOND
Theme for this fortnight: BONDS

 

A fixed income security issued by a firm in an Asian nation, other than Japan, which is denominated in a foreign currency, usually U.S. dollars. The purpose of a dragon bond is to attract funds from a larger market of foreign investors. A secondary reason for issuing dragon bonds is so the bond is denominated in a more stable currency.

Bonds denominated in foreign currencies are aimed at specific markets where investors are usually willing to lend money on more favorable terms than may be available to them domestically. Because of their international nature, dragon bonds can be complicated instruments when considering international taxation and regulatory compliance issues.

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FALLEN ANGEL

Today's word: FALLEN ANGEL
Theme for this fortnight: BONDS

 

A bond that was once investment grade but has since been reduced to junk bond status.  It could also be a stock that has fallen substantially from its all-time highs. There is a fine line between fallen angels that are value stocks and those that are headed straight towards bankruptcy.

 

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VRITTAM (28 JULY 2013 to 4 AUGUST 2013)

Chidambaram's prescriptions to deal with India's problems

Please find top 10 immediate actions to be taken as per Mr. Chidambaram to deal with India’s problems.

Obama narrows on candidates as successor to Bernanke

US President Barack Obama has zeroed in on “some extraordinary candidates” to succeed Federal Reserve Chairman Ben Bernanke who can take ordinary people’s views into account when deciding the fiscal policy of the world’s largest economy.

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BULLDOG BOND

Today's word: BULLDOG BOND
Theme for this fortnight: BONDS

A type of bond purchased by buyers interested in earning a revenue stream from the British pound or sterling. A bulldog bond is traded in the United Kingdom. If the revenue is used to reduce debt also in British pounds, the exchange rate risk is decreased. These bonds are issued by non-British institutions that want to sell the bond in the United Kingdom. U.S. investors can also purchase this bond, but by doing so they take on the risk of the change in value of the sterling.

These sterling bonds are referred to as bulldog bonds as the bulldog is a national symbol of England. The sterling is considered the third largest reserve currency in the world after the U.S. dollar and the euro. This bond is similar to the Yankee bond in that a non-American company can sell these bonds in the United Sates in order to raise capital. The Yankee bond is denominated in U.S. dollars.

 

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BABY BOND

Today's word: BABY BOND
Theme for this fortnight: BONDS

 

Fixed income securities issued in small denominations, generally with a maximum face value of $5,000. The small denominations enhance the attraction of baby bonds to the average retail investor.

Baby bonds are now issued mainly by municipalities, counties and states to fund expensive infrastructure projects and capital expenditures. These tax-exempt municipal bonds are generally structured as zero-coupon bonds with a maturity of between eight and 15 years.

 

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Bidding for a new UMPP: Is it a wise bet?

Four UMPP (Ultra Mega Power Projects) that Tata and Reliance Power bid for post 2005 struggled during the implementation stage.  Rising coal prices, the Coalgate scam, a depreciating rupee, an inability to pass on the tariff hike to end consumers, problems in land acquisition and environmental issues have proved as impediments in the path of setting up UMPPs. Overall, these projects were expected to add 16000 MW of electricity generation. 

However, only Mundra Power plant (by Tata Power), a 4,000 MW UMPP was implemented after a lot of struggle. One of the pressing issues that Tata Power or any other power generation company faces is a heavy dependency on imported coal. Fuel forms approximately 70% of the total operational costs; as Indian projects are largely dependent on Indonesian coal imports for its operations. For example, Mundra and Krishnapattam UMPP are largely dependent on imported coal. This imposes further pressure on the operational costs.  With limited production of coal by Coal India and other Indian coal mines, the shortage of Indian coal supply remains a looming bottleneck. Although to ease this situation, the government is looking at 100 million tonnes - 180 million tonnes of coal imports by Indian companies. These imports will help Indian power generating companies sustain electricity generation across India. 

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