IRFC set to open its public issue of tax-free bonds today
Rural Electrification Corporation (REC) is set to raise Rs 2,225 crore via three-year bonds at a coupon rate of 8.05%, bond arrangers close to the development said.
Sources said the issue saw a fairly good response, with SBI Caps being the single largest investor at Rs 1,000 crore. “The yield at 8.05% is considered a reasonable rate,” a bond arranger close to the deal said.
Market participants, however, also said it is hard to compare the yield movement under current circumstances considering that activity in the corporate bond market has been dull towards the end of the calendar year.
Recently, Export Import Bank of India (EXIM) issued three-year bonds at a rate of 7.82% while National Bank for Agriculture and Rural Development (NABARD) raised funds via three-year paper at 7.90%, according to Bloomberg data.
However, yields on EXIM Bank and NABARD’s bonds are comparatively lower than most other public sector units, according to bond arrangers.
Yields had come down in October after the Reserve Bank of India (RBI) cut the repo rate by 50 basis points in its September 29 monetary policy. Bloomberg data shows Power Finance Corporation (PFC) issued three-year bonds at a yield of 8% in October. A few months back, three-year papers were being issued at rates close to 8.25%.
REC had recently finished raising R700 crore through the public issue of its tax-free debt. The issue had seen good subscription and it was for the first time this fiscal that public issue of tax-free bonds witnessed a coupon below 7% on 10-year paper for categories that include institutionals, corporates and HNIs.
Indian Railway Finance Corporation’s (IRFC) public issue of tax-free bonds is set to open on Tuesday. The financing arm of the Indian Railways plans to raise as much as R4,532 crore via the public issue of its debt.
Bond arrangers said the coupon rates stand at 7.07%, 7.28% and 7.25% on its 10, 15 and 20-year tax-free bonds, respectively, for categories that include institutionals, corporates and HNIs.
For retail individual investors, the coupon rates are at 7.32%, 7.53% and 7.50% on 10,15 and 20 year bonds, respectively, arrangers said.
National Highways Authority of India (NHAI) and Housing and Urban Development Corporation (HUDCO) may be the next in line to come out with the public issue of tax-free bonds.