India Infrastructure Financial Company?s (IIFCL) has raised about R890 crore through tax-free bonds since the issue opened on December 26. The first tranche of the bonds is pegged at R1,500 crore and the issue is open till January 11, 2013. The buyers have been private and public sector banks. ?Banks are subscribing to the QIB portion, especially in the 20-year tenure, as they expect a fall in interest rates going forward,? said a merchant banker with a private bank, adding these institutions will offload bonds in the secondary market once yields start falling. About R580 crore of IIFCL bonds have been bought by QIBs, R150 crore by retail investors, R75 crore by high-net worth individuals and R40 crore by corporates.
Axis Bank, Allahabad Bank and Bank of India have bought R100 crore worth of IIFCL bonds while Bank of Baroda, Union Bank, IDBI Bank, Dena Bank and Oriental Bank of Commerce have bought bonds worth R50 crore each, according to a source close to the deal. State Bank of India, along with ICICI Bank, Punjab National Bank and Kotak Mahindra Bank are also expected to buy R50-100 crore worth of the tax-free paper.
A bulk of a similar issue by Power Finance Corp (PFC) had been subscribed to by high net worth individuals and retail customers with subdued interest from qualified institutional buyers resulted in the issue remaining under-subscribed. PFC was able to raise just R709 crore. The state-owned power financing company was targetting R1,000 crore with a green-shoe option of R3,590 crore. Banks feel IIFCL to be a safe bet as it is not focused solely on financing the power sector. However, it is unlikely that IIFCL would be able to raise the total targetted amount of R10,715 crore.
Tax-free bonds issued by Rural Electrification Corp (REC) were also oversubscribed twice but the company was disappointed as that was less than half of R4,500 crore it intended to raise.
IIFCL is the only public sector infrastructure finance company that has been allowed to issue tax-free bonds across three tenures of 10 years, 15 years and 20 years. Others have been allowed to offer two tenures of 10 years and 15 years for their tax free bonds.