IIFCL's Rs.9,215-Cr Tax-Free Bond Issue to Open Tomorrow

New Delhi: India Infrastructure Finance Co Ltd (IIFCL) said its Rs.9,215-crore tax-free bond issue would open. The funds raised would help the state-run financing institution lend long term to infrastructure projects in the country.

“IIFCL is planning to raise Rs.1,500 crore with a green shoe option up to the shelf limit of Rs.9,215 crore on a first-come-first-serve basis through public issue of tax-free bonds in 2012-13,” Chairman and Managing Director S K Goel told reporters.

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The issue will remain open from December 26 to January 11. It will be available at the coupon rates of 7.69 per cent an annum (10 years), 7.86 per cent (15 years) and 7.9 per cent (20 years) to retail individual investors. Qualified institutional buyers, companies and high net-worth individuals would get the bonds at the rate of 7.19 per cent, 7.36 per cent and 7.4 per cent, respectively.

Asked whether IIFCL would be able to attract investors at these rates, especially when tax-free bonds of other state-run companies such as Power Finance Corp (PFC) and Rural Electrification Corp (REC) have found few takers, Goel said the coupon rate on its bond last year was even lower but it still got over-subscribed. IIFCL’s risk is well distributed across various sectors, unlike REC and PFC, and its bonds are rated AAA, which meant minimum risk for investors, he added.

In Budget 2012-13, the government had allowed IIFCL to raise Rs.10,000 crore through tax-free bonds. IIFCL has already raised Rs.785 crore through private placement.

In the case of tax-free bonds, the interest earned on the invested amount is exempted from income tax. These are different from tax-saving bonds in which the invested amount is allowed for deduction from the total taxable income.

Goel said since the government had discontinued tax-saving bonds from this financial year, investors would come to IIFCL’s tax-free bond. The issue is coming at a time of the year when people start making investments to save taxes. The bonds with no-lock in period would be listed on the BSE.

Asked whether IIFCL had requested the government for allowing infrastructure financing institutions to raise funds through tax-saving bonds, he said: “It’s always our wish-list to get access to cheaper sources of funds. It’s up to the government to allow or not.”

IIFCL has set a target of Rs.30,000 crore loan disbursement for this financial year. It has already disbursed around Rs.26,000 crore.

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