India Infrastructure Finance Company to raise Rs 7,000 crore through tax-free bonds

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The yield on the 10-year benchmark is currently 8.793%. (Thinkstock) The yield on the 10-year benchmark is currently 8.793%. (Thinkstock)
SummaryIndia Infrastructure Finance Company (IIFCL) plans a public issue of tax-free bonds in October.

State-owned India Infrastructure Finance Company (IIFCL) plans to raise Rs 7,000 crore via a public issue of tax-free bonds in October, according to a senior company official.

The IIFCL executive said the coupon rate for retail customers will be 55 bps below the weekly average yield of the 10-year G-sec in the week before the launch of the issue. The yield on the 10-year benchmark is currently 8.793%.

For corporates and qualified institutional buyers, the coupon rate will be 80 bps below the weekly average 10-year G-sec bond yield. The quota for retail investors is 40% of the size of the issue or Rs 2,800 crore.

Meanwhile, Housing and Urban Development Corporation's (Hudco) tax-free bonds issue, targeted to raise up to up to R4,809 crore, has seen about R1,585 crore being mopped up, according to the Bombay Stock Exchange website.

IIFCL had raised about R632 crore via private placement of tax-free bonds in August. It was offering its bonds in three tenures of 10 years at 7.75%, 15 years at 8.26% and 20 years at a coupon of 8.19%. The finance ministry has allowed IIFCL to raise R10,000 crore via tax-free bonds this fiscal.

Hudco's bonds have a coupon rate of 8.14% for 10 years, 8.51% for 15 years and 8.49% for 20 years for corporates, qualified institutional buyers and high networth individuals applying for bonds more than R10 lakh.

Retail investors will get 25 bps higher rates in all the tenures. The finance ministry has allowed Hudco to raise R5,000 crore through tax-free bonds and the company raised R190 crore through private placements last month.

The Rural Electrification Company (REC) has already raised R3,500 crore through tax-free bonds. The issue was to close on September 16, but closed earlier as the shelf limit of the issue was reached.

The government has allowed 13 public sector institutions to raise R48,000 crore through tax-free bonds in 2013-14 to meet their infrastructure investment needs. Power Finance Corporation (PFC) is also expected to raise funds through tax-free bonds this month.

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