India Infrastructure Finance Company (IIFCL) today said its Rs 9,215 crore tax-free bond issue would open on December 26, 2012. The funds raised though the issue 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 Green Shoe Option up to the shelf limit of Rs 9,215 crore on first come first basis through public issue of tax-free bonds in 2012-13,” its Chairman and Managing Director SK Goel told a press conference today.
The bond issue will remain open from December 26, 2012 to January 11, 2013. It will be available at the coupon rates of 7.69% per annum (10 years), 7.86% (15 years) and 7.9% (20 years) to retail individual investors. Qualified institutional buyers, corporates and high net worth individuals would get the bonds at the rate of 7.19%, 7.36% and 7.4%, 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 Corporation and Rural Electrification Corporation have found few takers, Goel said the coupon rate on its bond last year was even lower but it still got oversubscribed. He added IIFCL risk is well distributed across various sectors unlike REC and PFC and its bonds are rated AAA, which means minimum risk for investors.
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 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 has discontinued the tax-saving bonds from this financial year, investors would come to IIFCL’s tax-free bond which is coming at the time of the year when people start making investments to save taxes. The bonds with no-lock in period would be listed at the Bombay Stock Exchange.
Asked whether IIFCL has requested government for allowing infrastructure financing institutions to raise funds through tax-saving bonds, he said, "It is always our wish-list to get access to cheaper sources of funds. It is 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.
