After recent tax free issues of IREDA, IIFCL and EPL, three more companies - Indian Railway Finance Corporation (IRFC), Housing & Urban Development Corporation (HUDCO) and Rural Electrification Corporation have come out with their tax free bonds.
Experts say that it will probably be the last tranche of bond issues for the current financial year. SEBI data shows that so far public issue of NCDs and tax-free bonds have mobilized close to Rs. 34,000 crore as on February.
All the issues are open for subscription currently. IRFC issue will close on March 7 while HUDCO and REC will close on March 19 and March 14, respectively.
While IRFC and REC are offering an effective tax free yield of 8.88% per annum to retail investors for 15 year tenure, HUDCO is offering slightly higher rate of 8.98% per annum to individual investors for the same tenure.
Who can apply: Resident individuals, HUFs, partnership firms, companies and body corporates, banks, public financial institutions, national investment funds, mutual funds, venture capital, insurance companies, commercial banks, co-operative banks, public/private charitable trusts, industrial research organizations can invest.
Application size: All issues have a face value of Rs. 1000 with minimum investment of Rs. 5000 for five bonds.
Greenshoe option: IRFC plans to collect Rs. 1500 crore with an option to retain an additional Rs. 1416.87 crore if the issue gets oversubscribed aggregating total issue size to Rs. 2916.87 crore. Similarly, REC aims to collect Rs. 250 crore and has a greenshoe option to retain another Rs 809.39 crore if the issue gets oversubscribed.
HUDCO also aims to collect Rs 75 crore with an option to retain another Rs 285.81 crore if the issue gets oversubscribed. The maximum size of issue will be Rs 360.81 crore.
Allocation: Both IRFC and EPL have reserved 40% of tax free bonds for retail investors. While IRFC has reserved 10% of total issue size for QIB, 30% for corporates and 20% for HNIs, REC have allocated 10% of issue size for institutional investors, 25% for corporate and 25% for HNIs. HUDCO has assigned 60% of issues for retail investors, 10% for QIB, 10% for corporates and 20% for HNIs.
Credit Ratings: CRISIL, ICRA and CARE have assigned a rating of AAA (Triple A) to tax free bond of IRFC. Also, CRISIL, ICRA, CARE and India Ratings and Research (IRRPL) have assigned a rating of AAA (Triple A) to the tax free issue of REC. The ratings indicate that these instruments carry very low credit risk and high degree of safety regarding timely servicing of financial obligations.
Meanwhile, IRRPL and Care have rated AA+ (double A plus) to tax free issue of HUDCO. Such issues give safety regarding timely servicing of financial obligations.
Tentative brokerage structure: The brokerage for IRFC, REC and HUDCO issue ranges between 0.20% and 0.85% per application offered upfront based on tenure.
Effective Yield:
Who can sell these bonds: Registered stock brokers with any stock exchange along with their respective sub-brokers, banks and intermediaries selected by the issuing company.
How can IFAs sell these bonds: An IFA has to sign the sub-broker agreement with a stock broker to be eligible to sell these bonds.
Trustee for all issues: SBICAP Trust Company.
Registrar for all issues: Karvy Computershare.
Listing: Both REC and HUDCO tax free bond will be listed on BSE while IRFC issues will be listed on both BSE and NSE.
Depositories: NSDL and CDSL
Lead Managers: IRFC – SBI Capital, AK Capital, Axis Capital, ICICI Securities and Kotak Investment Banking.
REC - AK Capital, Axis Capital, ICICI Securities and Edelweiss Financial.
HUDCO - Karvy Investment Banking, Axis Capital, Edelweiss Financial and HDFC Bank.