Mumbai:A number of tax-free bond issues are slated to hit the stands in the coming three months. According to the government, ten infrastructure or infrastructure finance companies, which include India Infrastructure Finance Co (IIFCL), National Highways Authority of India (NHAI), Housing and Urban Development Corp (Hudco), Power Finance Corp (PFC) and IRFC, have together been allowed to raise Rs 60,000 crore from the public during 2012-13. Of this, so far not more than Rs 10,000 crore has been raised through a handful of issues, a part of which was done through the private placement route.
The January-February-March period (popularly the JFM months) is set a witness a series of offers from infrastructure companies, rushing in to get the most out of the Rs 50,000-crore fund raising opportunity they have this fiscal. The offer from IIFCL is set to open on December 26 and close on January 11, while the Hudco offer will open on January 9. IIFCL can raise up to Rs 9,215 crore through this offering, while Hudco can mobilise up to Rs 5,000 crore. Two offers, one each from REC and PFC, closed earlier this month.
Tax-free infrastructure bonds were proposed by the government to channelize retail and institutional savings into the infra sector of the country through long-term bonds. To make these bonds attractive and widen the investor base, government has allowed full tax exemptions to interest income from these bonds. To make these instruments even more attractive to retail investors, for example, IIFCL is now offering an extra 50 basis points (half a percentage points) for those investors, who are applying for bonds worth less than Rs 10 lakhs. Most of these bonds are also coming with high credit ratings, indicating low risks involved in these instruments.
These bonds do not allow any tax rebates to investors, but the interest income from these instruments is tax exempt. Market analysts and investment advisors believe that during the JFM period more such offers would hit the street, giving investors the option to invest in an instrument which is relative new but has several advantages.
"These bonds come with safety and consistency of return," said Hemant Rustagi, CEO, Wiseinvest Advisors, a financial planning outfit. "All these bonds are from government-run companies, have the highest or very high credit ratings, and are also listed and frequently traded. So the common and the biggest fear among retail investors, that of losing your money, is taken care of."
Ten infrastructure or infrastructure finance companies, including IIFCL, NHAI, HUDCO, PFC and IRFC, have together been allowed to raise 60,000 crore from the public
Only 10,000 crore have been raised so far through a handful of issues. So, Jan-March quarter is set witness a flurry of offers from these companies
The IIFCL offer, which is set to open on Dec 26 and close on January 11, can raise up to 9,215 crore. HUDCO issue will hit market on January 9 and may mobilise up to 5,000 crore Govt had proposed tax-free infrastructure bonds to channelise retail and institutional savings into the infra sector via long term bonds
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