THERE seems to be a mad rush from companies to tap the bond market, as attractive interest rates is being used as a tool to lure investors for raising funds in the light of uncertain equity markets.
On Wednesday, IDFC launched its second tranche of tax-saving infrastructure bonds, looking to raise funds from the maximum limit of Rs 5,000 crore, after mopping up Rs 533 crore from its first tranche of bond issuances in December.
It is learnt that after a big-bang fund mop-up by the government-controlled NHAI and PFC, another government firm Housing and Urban Development Corporation (Hudco) will soon look to raise up to Rs 4,685 crore through taxfree bonds.
IDFC, after having raised Rs 533 crore from the first installment last year, can now raise up to Rs 4,400 crore through issuance of a secured, redeemable, non-convertible debentures, officials told reporters.
This product is relatively well understood by people now. We certainly believe IDFC is well-placed to raise funds and deploy it in the country's infrastructure projects. From retail investors' perspective, they are buying debt into highest credit quality rating organisation. IDFC, an integrated infrastructure finance company, is offering bonds at an interest rate of 8.70 per cent per annum, which is payable annually or compounded annually. In its first tranche, the company was offering 9 per cent, but with 10-year bond rate easing in December, the rate of interest also softened marginally.
Credit rating firms, Icra and Fitch, have assigned 'AAA' rating for the company's bonds, indicating stable outlook.
The bonds, which are open for subscription from January 11, will close on February 25. Earlier this week, L&T Infrastructure Finance said it would look to mop up Rs 300 crore through tax-saving bonds at 8.70 per cent per annum.
The second tranche of long-term infrastructure bonds will provide tax benefits to salaried employees under Section 80CCF of the Income Tax Act, 1961.
The bonds can be redeemed after 10 years from the date of allotment, while it have a buy-back option at the end of five years, the release said.
The funds raised through the issue of bonds will be utilised towards infrastructure lending in accordance with statutory and regulatory requirements of the Reserve Bank of India and ministry of finance.
The lead managers to the bond issue are Karvy Investor Services, HDFC Bank (investment banking division), ICICI Securities, JM Financial Consultants and IDFC Capital.
While tax-saving bonds are being pushed aggressively to woo the salaried class ahead of the financial year end, companies are also issuing tax-free bonds, probably riding on the investors' sentiment which are looking to find safe haven in debt-related instruments.
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