IIFCL too boards infra bond wagon, to raise Rs 1,200 cr
The pre-tax yield of these bonds works out to over 11%. A taxpayer, in the 30% tax bracket, can save up to 6,180, by investing 20,000 in these bonds.
By Apurva Gupta, ET Bureau |
MUMBAI: State-run India Infrastructure Finance Company (IIFCL) will launch tax-free bonds on Friday to raise 1,200 crore, joining a growing list of infrastructure financing companies tapping investors through debt offerings.
After the government approved last year issuance of long-tenor tax-free bonds for funding infrastructure projects, the Industrial Finance Corporation of India, or IFCI, and the Rural Electrification Corporation, or REC, raised money through the private placement route.
The company will offer four options with 10-year bonds offering 8.15% compounded annually and 15-year bond offering 8.30%, which is higher than the 7.5-8% offered by earlier issuers such as IDFC, L&T Finance and IFCI. The bonds have a minimum lock-in period of five years.
The pre-tax yield of these bonds works out to over 11%. A taxpayer, in the 30% tax bracket, can save up to 6,180, by investing 20,000 in these bonds.
Companies have to benchmark the interest rate based on the 10-year yield on government securities prevailing at the month-end preceding the issue date. In the case of IIFCL, with rising interest rates, it had room to offer higher returns to attract investors.
In the 2010 budget, the government added a new provision under section 80CCF of the IT Act for tax-saving investments, allowing for a deduction of 20,000 for investments made in notified long-term infrastructure bonds, besides the 1 lakh deduction available under section 80C. These bonds can be issued by a Non Banking Finance Company classified as an infrastructure finance company by the Reserve Bank of India.
IFCI recently closed its second bond offering by privately placing 50 crore with a green shoe option. Earlier, it had raised close to 60 crore in the first tranche, according to brokers. The IDFC has also launched its second tranche to raise about 2,930 crore, aiming to mop up a total of 3,400 crore.
L&T Infrastructure Finance earlier raised about 240 crore. REC also recently opened its issue of 50 crore with an option to retain green-shoe through private placement. Power Finance Corporation is also expected to launch its bonds soon.
After the government approved last year issuance of long-tenor tax-free bonds for funding infrastructure projects, the Industrial Finance Corporation of India, or IFCI, and the Rural Electrification Corporation, or REC, raised money through the private placement route.
The company will offer four options with 10-year bonds offering 8.15% compounded annually and 15-year bond offering 8.30%, which is higher than the 7.5-8% offered by earlier issuers such as IDFC, L&T Finance and IFCI. The bonds have a minimum lock-in period of five years.
The pre-tax yield of these bonds works out to over 11%. A taxpayer, in the 30% tax bracket, can save up to 6,180, by investing 20,000 in these bonds.
Companies have to benchmark the interest rate based on the 10-year yield on government securities prevailing at the month-end preceding the issue date. In the case of IIFCL, with rising interest rates, it had room to offer higher returns to attract investors.
In the 2010 budget, the government added a new provision under section 80CCF of the IT Act for tax-saving investments, allowing for a deduction of 20,000 for investments made in notified long-term infrastructure bonds, besides the 1 lakh deduction available under section 80C. These bonds can be issued by a Non Banking Finance Company classified as an infrastructure finance company by the Reserve Bank of India.
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IFCI recently closed its second bond offering by privately placing 50 crore with a green shoe option. Earlier, it had raised close to 60 crore in the first tranche, according to brokers. The IDFC has also launched its second tranche to raise about 2,930 crore, aiming to mop up a total of 3,400 crore.
L&T Infrastructure Finance earlier raised about 240 crore. REC also recently opened its issue of 50 crore with an option to retain green-shoe through private placement. Power Finance Corporation is also expected to launch its bonds soon.
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