Largest issue this fiscal via private placement route
National Highways Authority of India (NHAI) has received bids worth Rs 3,872 crore for its tax-free bond issue through the private placement route, according to sources in the bond market.
Bond market participants said the company is issuing 10-year tax-free bonds at 7.11% while the coupon rate for the 15-year bonds is at 7.28%. Sources said that the company received bids worth Rs 549 crore for its 10-year bond issue and Rs 3,323 crore for its 15-year issue.
“NHAI has received bids worth Rs 3,872 crore for its 10- and 15-year tax-free bonds combined. This is a historical amount being raised in one single tranche through the private placement route in case of tax-free bonds,” a bond arranger said, adding that the pay-in date for the issue is on September 18. Another participant said this is the first 15-year tax-free bond issue this fiscal year.
Market sources said that NHAI’s tax-free bonds received an overwhelming response from investors although the coupon rate is lower than the rate offered by other companies for their tax-free bond issues this fiscal year. NHAI has been permitted to raise Rs 24,000 crore through tax-free bonds in the fiscal year 2016 of which Rs 7,200 crore could be raised through the private placement route.
For this fiscal year, seven companies have been allotted a total limit of Rs 40,000 crore to be raised through tax-free bonds. So far, Power Finance Corporation , Rural Electrification Corporation, Indian Railway Finance Corporation, NTPC and Housing and Urban Development Corporation (Hudco) have issued tax-free bonds this fiscal year. NHAI has been given the largest allotment at Rs 24,000 crore while Hudco has been permitted to raise Rs 5,000 crore through tax-free bonds. IREDA has been allowed Rs 2,000 crore while PFC, REC and NTPC could raise Rs 1,000 crore each. Tax-free bonds had made a comeback this fiscal after remaining absent in FY15. They 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.