In a fresh attempt to raise R5,000 crore, Housing and Urban Development Corp (Hudco) has extended sale of tax-free bonds for the second time by a week to February 7, according to merchant bankers.
Hudco has so far raised R1,68,3 crore and hopes to pick up more, but the issue, initially expected to close on January 22, was extended till February 1. Merchant bankers say after RBI?s move to cut policy rates on January 29, Hudco was hoping to get more buyers for these bonds, but that has not happened so far. They say retail and high net worth individuals were the bulk of the buyers accounting for over R1,000 crore of the total subscription sold.
Meanwhile, Indian Railways Finance Corp (IRFC), which had also extended the sale its bond on Tuesday to February 8, is also struggling to raise its target amount of R8,886 crore. IRFC had raised about R2,487 crore by Friday.
While corporates have bought around 50% of the issue, the response from retail and high net worth individuals has been dull, merchant bankers said. Hudco has attracted more retail and high net worth investors than other company since being a lower rated paper it was able to offer 12-13 basis points more on the coupon than the rest.
So far, not a single company has been able to raise the target amount by issuing tax-free bonds as coupon offered this time were lower than last financial year, when the government for the first time had allowed infrastructure companies to sell these bonds. India Infrastructure Finance Company raised R2,850 crore, highest amount picked up among all the five issuances so far, as it was able to attract private and public sector banks. However, IIFCL too fell short of its target to raise R9,200 crore. Rural Electrification Corp (REC), whose bond issuance opened in December, raised about R2,100 crore, less than half its target of R4,500 crore. Meanwhile, Power Finance Corp?s (PFC) bonds fared worst as even after extending the sale of bonds by a week it was undersubscribed and was able to raise just about Rs.709 crore.