Indian Railway Finance Corporation’s (IRFC) public issue of tax-free bonds received a decent response from investors with the issue getting over-subscribed by 2.38 times, according to information provided by bond arrangers by evening.
Against an issue size of Rs 4,532 crore, the issue received bids close to Rs 10,796 crore on Tuesday. The maximum response came from the Qualified Institutional Buyers (QIB) who put in bids worth Rs 3,375.02 crore against their allotted size of Rs 679.80 crore.
This was followed by the corporate investors category which subscribed the issue by 3.34 times the allotted amount and HNIs who put in bids worth 1.8 times their quota. Retail investors put in bids worth Rs 2,358.03 crore against the allotted amount of Rs 1,812.80 crore.
The coupon rates stood at 7.07%, 7.28% and 7.25% on 10, 15 and 20-year tax-free bonds, respectively, for categories that include institutionals, corporates and HNIs.
For retail individual investors, the coupon rates stood at 7.32%, 7.53% and 7.50% on 10,15 and 20 year bonds respectively.
IRFC has been allotted a total of Rs 6,000 crore of tax-free bond limit this fiscal year. The company has raised part of the amount through the private placement route.
Prior to IRFC’s public issue, Power Finance Corporation (PFC), NTPC and Rural Electrification Corporation (REC) had come out with their public issues as well. All three issues had received considerable response from investors.
Going forward market participants said that National Highways Authority of India (NHAI) and Housing and Urban Development Corporation (HUDCO) are in line to come out with their public issue of tax-free debt.
Tax-free bonds had made a comeback this fiscal after remaining absent in FY15 and seven companies have been permitted to raise a total of Rs 40,000 crore. Tax-free bonds were introduced in 2011-12 with an overall limit of Rs 30,000 crore to boost infrastructure spending.
In 2012-13, the limit was doubled to Rs 60,000 crore. However, companies just raised Rs 18,000 crore through these bonds which was way below the target. In FY14, the limit was kept at Rs 50,000 crore against which companies borrowed Rs 49,200 crore.