India Infrastructure Finance (IIFCL) raised R900 crore through private placement of tax-free bonds on Tuesday. The company offered its bonds in three tenures of 10 years at 8.01%, 15 years at 8.46% and 20 years at a coupon of 8.26%.
The public sector infra finance company, which is allowed to raise 30% of R10,000 crore allowed by the government through private placements, has raised R1,532 crore already through two issuances and has room to raise about R900 crore more through private placement of tax-free bonds.
?We could come up with one or two more such transactions, but looking at the market today, we have to time the issue appropriately,? a senior company executive told FE. Among over 30 buyers of the issue, most were from corporates and trusts with no participation from banks.
On Monday, another public sector financing company, Rural Electrification Corp (REC), had garnered at least R1,250 crore through a similar private placement of tax-free bonds. Last week REC had planned to raise R150 crore, with an unspecified green-shoe option, from a taxable bond but shelved that plan as investors were expecting a coupon of 10.75%, which was higher than the company was willing to pay.
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 and said that 30% of R48,000 crore can be raised through private placement.
Since the tax-free bonds are priced at a discount to G-Sec, this year they could yield higher as the G-Sec has climbed as much as 150 basis points since July 15. Last fiscal, nine companies were able to raise just one-third of the total allowed by the government as the coupons were lower than that offered in FY12.