Hindustan Lever has mandated HSBC Securities and Capital Markets to buy out the debentures allotted to its shareholders in a recent bonus issue.

HSBC India has offered to buy debentures with a face value of Rs 6 each for Rs 6.23.

This is part of Hindustan Lever's early exit option for its retail shareholders, who would otherwise have to wait 18 months for the debentures to mature.

HSBC India will buy debentures worth a maximum amount of Rs 300 crore (Rs 3 billion).

The shareholders have another exit option by which they can sell their bonus debenture units either on the National Stock Exchange or on the Bombay Stock Exchange.

According to Hindustan Lever executives, the units will be listed in the next few days.

The HSBC offer, which opens on July 18 and continues till August 1, is only for retail debenture-holders and not for financial institutions, mutual funds, foreign institutional investors, corporate bodies and non-resident Indians.

"The benefit to retail shareholders is that they will be able to cash in on the payout upfront, rather than having to wait for 18 months," a company executive told Business Standard.

The debentures bear a 9 per cent coupon rate, which is high considering the current low interest rates.

HSBC will take the debentures on its own books. The yield for the bank works out to 8.66 per cent a year.

Hindustan Lever allotted 2.2 billion secured, fully-paid, redeemable, non-convertible debentures aggregating Rs 1,320.74 crore (Rs 13.21 billion) to its shareholders in a bonus issue, in the ratio of one debenture for every share of Re 1 held.

Easy exit

• HSBC has offered to buy debentures with a face value of Rs 6 each for Rs 6.23
• Move will offer early exit option for retail shareholders
• Debentures will mature after 18 months
• Shareholders can also sell units on the NSE or the BSE
• HSBC offer will open on July 18 and close on August 1