IDFC Collects Rs 538.08 Crore through Infrastructure bond Tranche 1 in 2011

Infrastructure Development Finance Company received a total subscription amount of approximately around Rs 538.08 crore (provisional) from approximately 2.7 lakh investors (including resident Indian individuals and hindu undivided families) through the public issue of first tranche of long term infrastructure bonds with a face value of Rs 5,000 each in the form of secured, redeemable, non-convertible debentures, having benefits under section 80CCF of the Income Tax Act, 1961.

The company is making a public issue of bonds for an aggregate amount not exceeding Rs 5,000 crore for FY 2012 under the shelf prospectus dated September 29, 2011 filed with the registrar of companies, Tamil Nadu, stock exchanges and the Securities and Exchange Board of India (SEBI) on September 29, 2011 and the respective tranche prospectus.

The first tranche of bonds are being issued by the company on the terms set out in the shelf prospectus and the prospectus – tranche 1 filed with the ROC on November 11, 2011. The subscription amount collected through issue of the Tranche 1 Bonds for FY 2012 is approximately 14% more than the corresponding subscription amount collected through the issue of first tranche of the tax-saving long term infrastructure bonds in November, 2010, for FY 2011.   

The issue of tranche 1 bonds opened for subscription on November 21, 2011, and closed on December 16, 2011, (earliest closing date) as decided by the Board of the Company. The tranche 1 bonds were issued in two series (Series 1 tranche 1 bonds carrying annual interest payments whereas series 2 tranche 2 bonds carrying cumulative interest payments) and carried an interest rate of 9% per annum.

The Tranche 1 Bonds have been rated as (ICRA) AAA by ICRA and Fitch AAA (Ind) by Fitch. While the ICRA rating indicates highest credit quality and stable outlook, the Fitch rating indicates a long term stable outlook. The ratings are considered to offer high safety for timely servicing of debt obligations. The tranche 1 bonds are proposed to be listed on the National Stock Exchange of India Limited and BSE Limited.
In June 2010, IDFC got the Infrastructure Finance Company (IFC) status within the NBFC category from the Reserve Bank of The Company had successfully raised Rs. 1,451 crore from over 7.3 lakh retail investors through the issue of the long-term infrastructure bonds in Fiscal 2010-11. 

The lead managers to the issue are ICICI Securities Limited, JM Financial Consultants Private Limited, Karvy Investor Services Limited, Kotak Mahindra Capital Company Limited and IDFC Capital Limited. The co-lead managers to the issue are Bajaj Capital Limited, RR Investors Capital Services Private Limited and SMC Capitals Limited. The registrar to the issue is Karvy Computershare Private Limited.

IDFC Section 80CCF Tax Saving Infrastructure Bonds

IDFC has launched their Section 80CCF infrastructure bonds, and these come with a slightly higher interest rate than the other bonds that have been released so far.

They carry a 9% annual interest rate, and IDFC has simplified the issue a little bit by having the option with only one maturity – that of ten years.

Like, the other 80CCF bonds, these will have the the annual interest payment or the cumulative option, and a buyback option after 5 years. 

The issue opens on November 21, 2011 and closes on December 16, 2011. In the past they have appeared on online platforms like ICICI Direct and Edelweiss, so that's one way to buy them, or as Austere suggested you can print the forms online and submit it in one of the collection centers.

Here are some other details about the bonds:

Series	1	2
Interest Rate	9%	Cumulative but effectively 9%
Maturity Period	10 years	10 years
Buyback Option	5 years	5 years
Buyback Amount	5,000	7,695
Maturity Amount	5,000	11,840

After the lock in period of 5 years, the bond will list on the NSE and BSE.

For whatever it's worth the issue is rated highly by ICRA and Fitch – both of them rated the issue AAA. To me, it doesn't make a lot of sense to apply anything more than Rs. 20,000 and that too only on one of these 80CCF bonds, so if you have applied for something already then you are better off investing your money in any other bank fixed deposit which doesn't have any lock in period and will have a slightly higher interest rate also.

A new question that I see appear a few times with respect to these bonds is if you need to buy it every year to get the tax benefit. I think the source of that question is the confusion between the tax benefit.

Please be cognizant of the fact that the interest is not tax free. The interest will be taxable every year, but the way you get the tax benefit is that the value of bonds that you buy gets reduced from your taxable salary, and that means you have to pay less tax.

The other question that I saw today was would you have to pay tax if you exercised the buyback and the answer to that is that buyback doesn't affect how the bond is taxed.

If you took the annual interest option then the interest will be taxed every year, and if you took the cumulative option then you will be taxed capital gains. The face value of the bond will not be taxed.

 

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You can download the Infrastructure Bond applications below: 



https://sites.google.com/site/infrabondapplications/