Since the interest rates of the bonds were fixed before the latest round of rate cuts by the RBI, the 20 year paper is still giving 7.6% for retail investors and for someone in the 30% tax bracket, the pre-tax yield will work out to 11%. The issue opens on October 5.

Retail investors should note that only `280 crore (or 40% of the issue) is open to them. As the issue will operate on a `first come, first served' basis, investors would do well to put in their money on 5 October itself. Going by the NTPC trend, the issue is likely to be oversubscribed. Investors who put in their money on the first day will be allotted the bonds in a proportionate manner.For instance, if the issue is oversubscribed 10 times, and you have applied for `10 lakh bonds, you will at least get `1 lakh.

PFC can raise `1,000 crore from taxfree bonds this financial year. The company has already raised `300 crore by issuing these bonds in private placement. CRISIL, ICRA and CARE have as signed `AAA' rating to the issue. In case of any default, bondholders carry the right to make claim on certain assets of the company. The bonds will get allotted and listed within 12 working days from the closing date of the issue.