The National Highways Authority of India (NHAI) is believed to have surrendered Rs 5,000 crore worth of tax-free bond limit to the government, according to two bond market sources aware of the development.
NHAI was allotted the highest quota of tax-free bonds limit this fiscal year at Rs 24,000 crore of the total Rs 40,000 crore given to seven companies.
“NHAI has surrendered Rs 5,000 crore limit of tax-free bonds back to the ministry and the government is likely to re-allocate that limit to another company in some time,” said one of the sources, adding that the ministry had held a meeting last week regarding the matter.
The company has raised between Rs 13,000 crore-Rs 14,000 crore through tax-free bonds this fiscal year. The company’s recently conducted public issue of tax-free bonds saw considerable response from investors who bid more than twice the issue size of Rs 10,000 crore.
“The company may further raise close to Rs 5,000 crore through tax-free bond issuance in the remaining part of the fiscal year,” a bond arranger said.
The source further pointed out that the surrendered limit is likely to be re-allocated to any of the players that have been permitted to issue tax-free bonds this fiscal year. “Most likely, the surrendered limits may be reallocated to either one of the remaining six companies that had received tax-free bonds quota this fiscal year.”
In FY16, NHAI, Indian Railway Finance Corporation (IRFC), Housing and Urban Development Corporation (HUDCO), Indian Renewable Energy Development Agency (IREDA), Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and NTPC have been permitted to raise a total of Rs 40,000 crore through tax-free bonds.
The instrument had made a comeback this fiscal after remaining absent in FY15. Tax-free bonds were introduced in 2011-12 with an overall limit of Rs 30,000 crore to boost infrastructure spending.
In 2012-13, the limit was doubled to Rs 60,000 crore. However, companies just raised Rs 18,000 crore through these bonds which was way below the target. In FY14, the limit was kept at Rs 50,000 crore against which companies had borrowed Rs 49,200 crore.