NHAI’s tax-free bond issue gets reasonable response

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Mumbai | Published: December 18, 2015 12:10:30 AM

Against the issue size of Rs 10,000 crore, investors bid for Rs 21,206.71 crore, according to data available till 5 pm on Thursday

National Highways Authority of India’s (NHAI) public issue of tax-free bonds saw a reasonable response on Thursday with investors bidding more than twice the issue size, according to information provided by bond arrangers.

Against the issue size of Rs 10,000 crore, investors bid Rs 21,206.71 crore, according to data available till 5 pm on Thursday.

The maximum subscription came from the institutional category, which subscribed more than four times the allotted amount of Rs 2,000 crore. This was followed by the NII category which subscribed 3.53 times their allotted amount of Rs 2,000 crore while the HNIs subscription stood at 1.75 times.

However, retail investors’ just utilised 0.63% of their allotted quota of Rs 4,000 crore on the first day of the issue.
NHAI is offering coupon rates of 7.14% and 7.35% for its 10 and 15-year bonds respectively for categories including institutionals, NIIs and HNIs. For retail investors, NHAI is offering coupon rates of 7.39% and 7.60% for its 10 and 15-year bonds respectively. The issue is set to close on December 31.

Earlier, Power Finance Corporation, NTPC, Rural Electrification Corporation and Indian Railway Finance Corporation had come out with their public issue of tax-free bonds, all of which saw good response from investors.
Housing and Urban Development Corporation (HUDCO) and Indian Renewable Energy Development Agency (IREDA) are the only two entities that are still to come out with their public issues.

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.

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