AFTER the success of IDFC’s long-term infrastructure bonds, L&T Infrastructure Finance’s infra bonds are attracting good response, indicating retail investors preference for safe and stable investment options, amid a weak equity market.
He said the investor response is in line with the company’s expectations and he believes that, now, investors are more forthcoming, because they have understood the importance of the tax-saving instrument, which also yields annual and cumulative interest benefits at 9 per cent.
The person said L&T is expected to get close to 300,000 applications this time.
A banker, who is part of the issue, says these bonds are an added attraction because they provide an additional Rs 20,000 tax savings under Section 80CCF, which is over and above Rs 100,000 under Section 80C of the Income Tax Act.
The response to the issue has been decent compared with last year, and L&T would definitely see a comparable response to its issue compared with IDFC.
It’s that time of the year when employees have to submit their investment proofs to avail tax benefits and we have noticed that a lot of investors are coming for L&T bonds after the IDFC issue closed.
On Tuesday, IDFC announced that it has raised around Rs 538 crore from the first tranche of its long term infra bonds, which is 14 per cent higher than the first tranche of last year's bonds.
L&T bonds have buyback options after five and seven years and would be listed on the Bombay Stock Exchange after a five-year lock-in period.
L&T Infrastructure Finance launched the first tranche of its Rs 1,100 crore long-term infra bonds in two series with 9 per cent coupon rate on November 25.
Retail investors can subscribe to a minimum of five bonds and in multiples of one bond thereafter. Each bond would have a face value of Rs 1,000.
The bonds will have a maturity of 10 years and a lock-in period of five years, with a buy-back option after the fifth year and the seventh year from the date of issue, the company said.
These bonds are options given to infrastructure finance companies (IFCs) to support lending requirements and avoid dependence on banks. IFCs are not allowed to take deposits from retail investors. L&T was given the infrastructure finance company (IFC) status in July 2010. It can, thus, access long-term funds to meet growth plans.
To add to this, the limit of bank financing and external commercial borrowings has also increased.
The company has a diversified disbursement mix with the power sector accounting for almost 39 per cent of its advances. Apart from this, the company also provides financing to telecom, roads, oil and gas, ports and other infrastructure sectors, such as logistics and special economic zones (SEZs).
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