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]
As National Highways Authority of India (NHAI) launches its tax-free bonds issue next week from January 15th i.e. the coming Wednesday, it would become the ninth such company to do that this financial year after REC, HUDCO, IIFCL, PFC, NHPC, NTPC, NHB and IRFC. NHAI would carry coupon rates of 8.75% per annum for the 15-year duration and 8.52% per annum for the 10-year duration.
Though the rates are not as attractive as National Housing Bank (NHB) offered, they are still better than IRFC. Like IRFC, NHAI has also decided not to offer the 20-year option. But, unlike IRFC, the issue is relatively smaller in size and will remain open for four more days i.e. fifteen days, to close on February 5th, Wednesday again.
Size of the Issue – NHAI is authorised to raise Rs. 5,000 crore from tax-free bonds this financial year, out of which it has already raised Rs. 1,301.60 crore through a private placement carried out on November 25, 2013. So, NHAI plans to raise the remaining Rs. 3,698.40 crore from this issue, with Rs. 1,000 crore as the base issue size and Rs. 2,698.40 crore as the green-shoe option.
Rating of the Issue – Being the nodal agency for the development and maintenance of national highways across the country and an autonomous body under the Ministry of Road Transport and Highways, this issue of NHAI has been rated as ‘AAA’ by three credit rating agencies, CRISIL, CARE and Brickwork Ratings, which is again the highest rating by these rating agencies.
Investor Categories & Allocation Ratio – The investors have been classified in the following four categories and each category will have certain percentage of the issue size reserved during the allocation process:
Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue i.e. Rs. 369.84 crore is reserved
Category II – Non-Institutional Investors (NIIs) – 30% of the issue i.e. Rs. 1,109.52 crore is reserved
Category III – High Net Worth Individuals including HUFs – 20% of the issue i.e. Rs. 739.68 crore is reserved
Category IV – Resident Indian Individuals including HUFs – 40% of the issue i.e. Rs. 1,479.36 crore is reserved
NRI Investment – Non-Resident Indians (NRIs) and Qualified Foreign Investors (QFIs) would be disappointed to know that they have been left out as ineligible to invest in this issue.
Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first come first serve (FCFS) basis in each of the investor categories, based on the date of upload of each application into the electronic system of the stock exchanges.
Demat/Physical Option – Investors have the option to apply for these bonds either in physical/certificate form or in demat form, whichever they are comfortable with. But, it is mandatory to have a demat account to sell/trade these bonds. Interest will still get credited to your respective bank accounts through ECS or to that bank account which is linked to your demat account.
Lock-in Period, Premature Redemption & Listing – As these are not tax saving bonds, there is no lock-in period with these bonds. But, at the same time, the investors cannot redeem these bonds back to the company before the maturity period gets over. In order to encash your investment before maturity, you’ll have to compulsorily sell these bonds on the stock exchange(s) where they have been listed for trading.
NHAI has decided to get these bonds listed on both the stock exchanges, National Stock Exchange (NSE) as well as Bombay Stock Exchange (BSE). As always, the company will get these bonds allotted and listed within 12 working days from the closing date of the issue.
Interest on Application Money & Refund – NHAI will pay interest to the successful allottees on their application money at the applicable rate of 8.52% p.a. or 8.75% p.a. as the case may be. It will be calculated from the date of realization of application money up to one day prior to the deemed date of allotment. Investors, who don’t get these bonds allotted, will get interest @ 5% p.a. on their refund money.
Face Value of the bonds & Minimum Investment – NHAI has decided to fix the face value of these bonds at Rs. 1,000 each and minimum application size at 5 bonds. So, the investors will have to invest at least Rs. 5,000 with the company.
Interest Payment Date & Record Date – NHAI has fixed the interest payment date to be March 15. So, the investors investing in this issue will get their first due interest paid on March 15, 2014 and subsequently on March 15 every year, except Sundays and other public holidays.
Record date will be fixed 15 days prior to the interest payment date, except Saturdays, Sundays and other public holidays.
Out of thirteen companies which have been allowed to issue tax-free bonds this financial year, six companies, REC, PFC, NHPC and NTPC, HUDCO and NHB have already exhausted their quota of fund raising through their public issues. While IRFC issue is open and NHAI coupon rates are out, only five other companies, IIFCL, IREDA, Airport Authority of India, Cochin Ship Yard and Ennore Port are left to do such exercise.
While nobody knows in which direction the G-Sec rates are headed, the investors are now left with very few choices to take advantage of these tax-free bonds this financial year. If you still think that inflation, India’s fiscal deficit and G-Sec rates are headed higher, you can probably wait for either IIFCL to launch its Tranche III issue or IREDA to launch its maiden tax-free bonds issue. Otherwise, I think you have only IRFC and NHAI issues to make a choice.
Application Form of NHAI Tax Free Bonds
Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in NHAI Tax Free Bonds, you can contact me at +919811797407
Hi shiv
when will actual allocation of NHAI will start ?
Regards
Vignesh
Hi Vignesh,
I think NHAI allotment should start happening from Thursday this week.
Just got the SMS of NHAI allotment.
That’s great, thanks for sharing this info!
Hi Shiv,
Any idea by when v can expect ireda bonds opening & its interest rate.
Hi Akhikesh,
There is no info I have to share about IREDA issue. Market sources are anticipating it to open sometime in the 2nd week of February.
Thanx Shiv for ur prompt reply.
Plz post d details in d comments section as & wen u get any info.
Sure, I’ll do that.
hi,
i would like to invest in nhai bonds. Is it still available? If so, please let me know the procedure, as am new to this.
Thanks
Hi Sowmiya,
NHAI issue has closed. IRFC issue is still open.
http://www.onemint.com/2013/12/28/irfc-tax-free-bonds-8-65-january-2014-issue/
When will the allotment be done ? when is the next issue and by whom 🙂
No info as yet.
Day 9 (January 27) subscription figures:
Category I – Rs. 597 crore as against Rs. 369.84 crore reserved
Category II – Rs. 1,110.85 crore as against Rs. 1,109.52 crore reserved
Category III – Rs. 865.56 crore as against Rs. 739.68 crore reserved
Category IV – Rs. 1,522.89 crore as against Rs. 1,479.36 crore reserved
Total Subscription – Rs. 4,096.29 crore as against total issue size of Rs. 3,698.40 crore
The issue stands closed today.
Hi Shiv,
Great info and analysis
If I subscribed to this issue today (27th Jan 2014), what percentage of allotment can I expect ? I am a retail investor
Thanks in advance.
Karthik
0% unless there is a heavy withdrawal of earlier bids.
Thanks Karthik for your kind words!
Also, I think you won’t get any allotment had you subscribed for these bonds today. The issue got oversubscribed in the retail category on Thursday itself. Also, the issue got closed today.
Shiv / Ashok,
I did subscribe to these on the last day. And guess what…I got full allotment….either there were some withdrawal of bids or I just got lucky 🙂
Oh that’s great, lucky you !! 🙂
NHAI has decided to preclose this issue on Monday, January 27th.
Good. We will get the allotment faster :).
🙂
Day 8 (January 24) subscription figures:
Category I – Rs. 597 crore as against Rs. 369.84 crore reserved
Category II – Rs. 1,110.85 crore as against Rs. 1,109.52 crore reserved
Category III – Rs. 863.95 crore as against Rs. 739.68 crore reserved
Category IV – Rs. 1,501.64 crore as against Rs. 1,479.36 crore reserved
Total Subscription – Rs. 4,073.43 crore as against total issue size of Rs. 3,698.40 crore
Day 7 (January 23) subscription figures:
Category I – Rs. 597 crore as against Rs. 369.84 crore reserved
Category II – Rs. 1,110.63 crore as against Rs. 1,109.52 crore reserved
Category III – Rs. 862.87 crore as against Rs. 739.68 crore reserved
Category IV – Rs. 1,486.07 crore as against Rs. 1,479.36 crore reserved
Total Subscription – Rs. 4,056.56 crore as against total issue size of Rs. 3,698.40 crore
Hi Shiv – Will the issue close on Monday ?
Hi Aditya,
NHAI should have closed it today itself, but it will get closed on Monday for sure.
I think this means roughly 92% allotment for the retail applications made today.
Yes, approximately 93%.
Todays subscription of NHai tax free bond?
Hi shiv
what is the today subscription figures of NHAI tax free bonds ?
Please can you post that
Shiv
any idea on Coupon rates ?
No idea as yet, it is too early to make a guess.
IREDA has filed the Draft Shelf Prospectus with SEBI for its tax free bond issue on January 21st. The issue will be ‘AAA’ rated and NRIs are not eligible to invest in this as well.
Retail investor category is expected to get oversubscribed either today or tomorrow maximum. The issue will get closed either on Friday or on Monday.
Day 6 (January 22) subscription figures:
Category I – Rs. 597 crore as against Rs. 369.84 crore reserved
Category II – Rs. 1,110.58 crore as against Rs. 1,109.52 crore reserved
Category III – Rs. 862.72 crore as against Rs. 739.68 crore reserved
Category IV – Rs. 1,394.40 crore as against Rs. 1,479.36 crore reserved
Total Subscription – Rs. 3,964.70 crore as against total issue size of Rs. 3,698.40 crore
Day 5 (January 21) subscription figures:
Category I – Rs. 597 crore as against Rs. 369.84 crore reserved
Category II – Rs. 1,110.58 crore as against Rs. 1,109.52 crore reserved
Category III – Rs. 861.89 crore as against Rs. 739.68 crore reserved
Category IV – Rs. 1,267.15 crore as against Rs. 1,479.36 crore reserved
Total Subscription – Rs. 3,836.62 crore as against total issue size of Rs. 3,698.40 crore
Chances of allottment seems to be fair today (Shiv, correct me if I am wrong). Over the last 4 days I have noticed a daily subscription not exceeding 300 crores in the retail category. Today day end we can expect almost near 1480 cr in retail category. Tomorrow it looks like the retail will be oversubscribed with practically no very limited chances of allottment.
I think it should take at least 2-3 days more for the retail category to get oversubscribed and cross Rs. 1,480 crore mark. Chances of full allotment are almost certain today.
Today’s figures for retail (category 4) is Rs. 1267.15 crores against Rs. 1,479.36 crore reserved. So there is still room for applications to be made for retail investors.
Hi Shiv,
Apart from yearly interest, will there be any capital/face value appreciation for the investment done in TFBs?
Hi Praveen,
Yes, there is a scope of capital appreciation with these bonds and apart from the tax-free interest, it is this feature only which attracts me the most. It happens whenever there is a fall in the general interest rates or G-Sec yields.
As observed with the recently listed bonds like NHB, HUDCO, NHPC, PFC etc. these bonds have already undergone some good gains in their prices. But, at the same time, there is a risk of capital loss also if interest rate move up from the current levels.
Hi Shiv
I have seen the Subscription figures.
i am a retail investor . is it make sense to apply now ?
As still Category 4 still have bandwidth if i apply tomorrow will i be able to get it ?
In case total subscription Crosses will there a chance for closing the subscription ? or it will be open till the individual category limits ?
It has been very useful shiv Onemint , In this uncertain environment Capital protection becomes a vital thing for my parents .
You have helped me a lot 🙂
Regards
Vignesh
Hi Vignesh, thanks a lot for your kind words and I am glad that our posts have helped you in taking better financial decisions! 🙂
Coming back to your query, if a retail investor applies for these bonds today, he’ll get full allotment. The company will not close this issue until the retail portion gets fully subscribed. I think it should take at least 2-3 days for the retail category to get oversubscribed.
Day 4 (January 20) subscription figures:
Category I – Rs. 597 crore as against Rs. 369.84 crore reserved
Category II – Rs. 1,110.58 crore as against Rs. 1,109.52 crore reserved
Category III – Rs. 864.59 crore as against Rs. 739.68 crore reserved
Category IV – Rs. 1,165.85 crore as against Rs. 1,479.36 crore reserved
Total Subscription – Rs. 3,738.01 crore as against total issue size of Rs. 3,698.40 crore
Total subscription figure crosses total issue size.