NTPC’s public issue of tax-free bonds, which opened on Wednesday, received a massive response from investors with the subscription amount touching Rs 4,417.58 crore against the total issue size of Rs 700 crore, bond arrangers said.
The highest subscription came from corporates at eight times the issue size followed by retail individual investors at over six times the size.
Bond arrangers attributed this response to the fact that tax-free bonds have made a comeback to the market after a period of one year.
“This is due to the fact that tax-free bonds are entering the market after having remained absent in the last fiscal year. Moreover, since this is the first public issue in this fiscal, combined with the fact that interest rates are falling, investors want to lock-in their money at as higher yields as possible. That is why we saw such a huge subscription,” said Ajay Manglunia, executive vice-president-fixed income, Edelweiss Securities.
NTPC had earlier raised Rs 300 crore through private placement of tax-free bonds. It was allotted a total of Rs 1,000 crore to be raised through tax-free bonds this fiscal year.
Power Finance Corporation (PFC), another state-owned company that has been permitted to issue tax-free bonds worth Rs 1,000 crore, is set to hit the market with its public issue in the first week of October, sources said.
Market participants indicated that the bonds will have coupon rates of 7.36%, 7.52% and 7.60% on its 10, 15 and 20-year issues respectively for retail individual investors while it will carry yields of 7.11%, 7.27% and 7.35% for institutionals, corporates and HNIs. The issue is set to open on October 5, market participants said. PFC had earlier raised Rs 300 crore through private placement of its tax-free bonds at 7.16%, according to bond market sources.
Indian Renewable Energy Development Agency (IREDA), which has been allotted a limit of Rs 2,000 crore, is likely to tap the markets soon. While 70% of the amount has to be raised through public issue of the tax-free bonds, the rest, i.e., Rs 600 crore, could be raised through private placement, according to the government notification.