This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]
After REC 8.71% issue and HUDCO 8.76% issue, India Infrastructure Finance Company Limited (IIFCL) would be the third such company to come up with its public issue of tax free bonds this financial year from the coming Thursday i.e. October 3rd.
IIFCL has fixed its coupon rates at 8.75% per annum for 20 years, 8.63% per annum for 15 years and 8.26% per annum for 10 years. As compared to the HUDCO issue, the rates are lower for the 10 year and 15 year options, but higher for the 20 year option. This is probably due to a rise in the longer duration rates in the last 10-odd days, after the Repo Rate hike by the RBI.
The issue has been rated ‘AAA’ as against the currently running ‘AA+’ rated issue of HUDCO. So, I think the investors, who were not subscribing to the HUDCO issue due to its lower rating of ‘AA+’, should definitely lap it up to enjoy higher tax free rate of interest.
The official closing date of the issue is October 31, but the company may extend it or preclose it, depending on the investors’ response to the issue.
Size of the Issue – IIFCL is allowed to raise Rs. 10,000 crore from tax-free bonds this financial year, out of which it has already raised Rs. 2,963.20 crore through three of its private placements. The company plans to raise Rs. 2,500 crore from this issue, including the green-shoe option of Rs. 2,000 crore, and that is why the company is calling it to be “Tranche-I Issue”.
The issue size is smaller in comparison to the issue size of REC bonds of Rs. 3,500 crore and also of HUDCO bonds of Rs. 4,809.20 crore. I was expecting IIFCL to raise Rs. 7,000 crore from this issue itself, but probably the company sees lesser investor appetite at this point in time, as the market is already flooded with other bond or NCD issues.
NRIs not allowed – This was quite surprising to me. Contrary to what was appearing in the newspapers a few days back to attract foreign investors or non-resident Indians (NRIs) to invest in some kind of infra bonds issued by IIFCL, the company has not allowed them to invest in this Tranche-I issue at least. Probably they have their own reasons behind it.
Listing – IIFCL will get these bonds listed only on the Bombay Stock Exchange (BSE). Investors can apply for these bonds either in demat form or in physical form, as per their comfort and requirement. The company will get the bonds allotted and listed within 12 working days from the issue closing date.
Interest on Application Money & Refund – IIFCL will pay interest to the successful allottees on their application money, from the date of realization of application money up to one day prior to the deemed date of allotment, at the applicable coupon rates. Unsuccessful allottees will get interest @ 5% per annum on their refund money.
Rating of the issue – Four companies have rated this issue, ICRA, Brickwork Ratings, CARE and India Ratings, and all of them have rated this issue at ‘AAA’, which is their highest rating to any debt issue. Also, these bonds are ‘Secured’ in nature against certain assets of the company.
Categories of Investors & Allocation Ratio – The investors again have been classified in the following four categories and each category will have certain percentage of the issue reserved for the allotment:
- Category I – Qualified Institutional Bidders (QIBs) – 15% of the issue is reserved
- Category II – Non-Institutional Investors (NIIs) – 20% of the issue is reserved
- Category III – High Networth Individuals (HNIs) including HUFs – 25% of the issue is reserved
- Category IV – Resident Indian Individuals (RIIs) including HUFs – 40% of the issue is reserved
Minimum & Maximum Investment – There is no change in the minimum investment requirement of Rs. 5,000 i.e. at least 5 bonds of Rs. 1,000 face value each. Retail Investors’ investment limit stands at Rs. 10 lakhs, beyond which they will be considered as HNIs and will get a lower rate of interest.
Profile of the company – IIFCL, which started its operations in 2006, is 100% owned by the Government of India. IIFCL has been a key institution in the infrastructure financing space and serves the strategic role in financing economically viable infrastructure projects in the country.
IIFCL is a favoured institution with the Government of India. Its board of directors includes representatives from the Ministry of Finance and the Planning Commission. Also, India Infrastructure Finance Company UK (IIFC-UK), IIFCL’s wholly-owned subsidiary, has a government-guaranteed $5 billion credit line from the Reserve Bank of India (RBI) against India’s foreign exchange reserves.
The government has supported IIFCL by way of regular equity infusions and this figure stood at Rs. 400 crore last financial year. IIFCL has total borrowings of Rs. 29,493 crore as on March 31, 2013, out of which 72% borrowings carry sovereign guarantee by the government.
With the interest rates still ruling higher, IIFCL’s interest rates look quite attractive to me. IIFCL is a special company in the infrastructure finance space and I think the support extended to it by the government will continue in the near future as well. With so many positives, I think this issue definitely merits some consideration by the investors.
Download the Application Forms of IIFCL Tax Free Bonds
As per SEBI guideline, ‘Bidding’ is mandatory before banking the application form. For bidding of your application, any further info or to invest in IIFCL tax-free bonds, you can contact me at +919811797407
dear shiv
i didn’t receive interest as of now. did anyone receive it ? is it because of bank strike?
Hello Shiv,
I got allotment of IIFCL issue but they allotted me a different bonds then the one i applied for.
I applied for 500 bonds for 20 years (8.75%) online through SBICap (on the 2nd/3rd day itself) but they allotted me 10 years bonds (8.26%).
What can i do now ? Is company allowed to do such thing without confirmation from investor ?
Appreciate your help.
Regards
Mukesh
Hi Mukesh,
The company is not allowed to do so. Though I am not sure, but I think it is SBI Cap’s mistake/error somewhere. You should write a mail to Karvy Computershare stating all the details about your case. They’ll let you know all the details about your application and why you got allotted bonds of 10-year duration.
IIFCL tax-free bonds to get listed on the BSE on November 14th i.e. Thursday.
Here are the BSE codes for the same:
8.26% 10-year bonds – BSE Code – 961794
8.63% 15-year bonds – BSE Code – 961796
8.75% 20-year bonds – BSE Code – 961798
Deemed date of allotment has been fixed as November 12, 2013. Interest will be paid on November 12 every year.
a very big Thank You Shiv for tracking these tax free bond issues so closely and updating status everyday.
You are welcome Bhaskar! 🙂
Adding my voice… Shiv is doing an excellent job! We all appreciate your efforts Shiv.
I am overwhelmed with your appreciation Amlan, thanks a lot for this praise & encouragement !! It really means a lot to me !! 🙂
I could not find the exact date of interest paying of the following bonds in to the respective post.
HUDCO Tax Free Bonds 2013
IIFCL Tax Free Bonds 2013
Can you give me the dates of Interest for this two Bonds.
Thanks
For HUDCO, it is October 25th every year, you can find it in one of my comments in the HUDCO post. For IIFCL, it is yet to get announced. I think it should fall between November 7th and November 12th.
Dear Mr. Shiv,
Pls let me know the interest paying dates for
1. Hudoco Tax free bonds 2013
2. IIFCL Tax free bonds 2013
3. NHPC Tax free bonds 2013
4. Shriram Transport Fin Co. NCD 2013
5. Shriram Transport Fin Co. Fixed deposites 2013
Thanks
DN Saxena
Dear Mr. Saxena,
Pls visit their respective posts and you’ll get to know the interest payment dates of all these issues either in the post itself or in one of the comments.
IIFCL Tax free issue close on 31 st October.
So when the allotment will come ?
It was not fully subscribed so it means whatever we applied we will get the full allotment.
Hi Paresh,
1. Allotment is expected in the next 7-10 working days.
2. Yes, you are right, every valid application will get the full allotment.
I am a little baffled. How do you explain the significant under-subscription of IIFCL vis-à-vis the oversubscription of PFC and NHPC? I do understand that NHPC is new paper and therefore provides a diversification choice. However, PFC is perhaps not different from IIFCL in either the way it is run (somewhat below reasonable standards), the manner in which they deploy resources (delayed disbursal of loans raised in previous years), etc. And yet we have this spectacle.
Perhaps Shiv will be able to tell us the reason(s)?
Hi Mr. Ramachandran,
There is no great reason other then higher rate of interest for PFC & NHPC issues to get such huge response from all categories of investors. I don’t think there is anything fundamentally better in favour of PFC & NHPC as compared to IIFCL. In fact, if all these five companies (including REC & HUDCO) were private companies, I think I would have invested my money with IIFCL.
Last Day (October 31st) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 230.12 crore as against Rs. 500 crore reserved
Category III – Rs. 418.29 crore as against Rs. 625 crore reserved
Category IV – Rs. 565.33 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 1,233.74 crore as against total issue size of Rs. 2,500 crore
The issue stands closed now.
Day 19 (October 30th) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 220.75 crore as against Rs. 500 crore reserved
Category III – Rs. 410.74 crore as against Rs. 625 crore reserved
Category IV – Rs. 545.03 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 1,196.52 crore as against total issue size of Rs. 2,500 crore
The issue is getting closed tomorrow.
Day 18 (October 29th) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 208.83 crore as against Rs. 500 crore reserved
Category III – Rs. 390.49 crore as against Rs. 625 crore reserved
Category IV – Rs. 528.38 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 1,147.69 crore as against total issue size of Rs. 2,500 crore
Day 17 (October 28th) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 204.78 crore as against Rs. 500 crore reserved
Category III – Rs. 371.45 crore as against Rs. 625 crore reserved
Category IV – Rs. 515.61 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 1,111.85 crore as against total issue size of Rs. 2,500 crore
Day 16 (October 25th) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 196.06 crore as against Rs. 500 crore reserved
Category III – Rs. 341.06 crore as against Rs. 625 crore reserved
Category IV – Rs. 494.21 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 1,051.33 crore as against total issue size of Rs. 2,500 crore
Day 15 (October 24th) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 171.70 crore as against Rs. 500 crore reserved
Category III – Rs. 331.32 crore as against Rs. 625 crore reserved
Category IV – Rs. 482.63 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 1,005.65 crore as against total issue size of Rs. 2,500 crore
Day 14 (October 23rd) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 167.36 crore as against Rs. 500 crore reserved
Category III – Rs. 312.56 crore as against Rs. 625 crore reserved
Category IV – Rs. 471.59 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 971.51 crore as against total issue size of Rs. 2,500 crore
Day 13 (October 22nd) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 165.13 crore as against Rs. 500 crore reserved
Category III – Rs. 294.10 crore as against Rs. 625 crore reserved
Category IV – Rs. 460.01 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 939.24 crore as against total issue size of Rs. 2,500 crore
Day 12 (October 21st) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 152.90 crore as against Rs. 500 crore reserved
Category III – Rs. 285.88 crore as against Rs. 625 crore reserved
Category IV – Rs. 448.19 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 906.98 crore as against total issue size of Rs. 2,500 crore
Day 11 (October 18th) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 145.13 crore as against Rs. 500 crore reserved
Category III – Rs. 275.21 crore as against Rs. 625 crore reserved
Category IV – Rs. 433.45 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 873.89 crore as against total issue size of Rs. 2,500 crore
Day 10 (October 17th) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 144.93 crore as against Rs. 500 crore reserved
Category III – Rs. 271.61 crore as against Rs. 625 crore reserved
Category IV – Rs. 420.54 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 857.09 crore as against total issue size of Rs. 2,500 crore
Day 9 (October 15th) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 137.85 crore as against Rs. 500 crore reserved
Category III – Rs. 266.29 crore as against Rs. 625 crore reserved
Category IV – Rs. 404.76 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 828.90 crore as against total issue size of Rs. 2,500 crore
Day 8 (October 14th) subscription figures:
Category I – Rs. 20 crore as against Rs. 375 crore reserved
Category II – Rs. 121.20 crore as against Rs. 500 crore reserved
Category III – Rs. 260.33 crore as against Rs. 625 crore reserved
Category IV – Rs. 381.41 crore as against Rs. 1,000 crore reserved
Total Subscription – Rs. 782.95 crore as against total issue size of Rs. 2,500 crore