Three state-run companies, Indian Railway Finance Corp, Rural Electrification Corp and India Infrastructure Finance Company, will hit the capital market tomorrow to collectively raise up to Rs 12,344 crore through sale of tax-free bonds.
While the minimum amount being targetted by the three firms together is Rs 1,300 crore, they are keeping their options open for retaining significant levels of over- subscriptions that could take the collective amount raised to Rs 12,344 crore
As per the information filed by the companies with the stock exchanges, IRFC is likely to raise a minimum of Rs 1,000 crore, while IIFCL and REC are planning to mop-up at least Rs 200 crore and Rs 100 crore, respectively.
IRFC, IIFCL and REC will have the option to retain over- subscription of up to Rs 3,531 crore, Rs 6,331 crore and Rs 2,482 crore, respectively from their issues.
In the current fiscal, most of the tax-free bond issuances have been highly oversubscribed. Indian companies have mopped up over Rs 7,800 crore through retail issuance of tax-free bonds, garnering nearly twice the amount originally targeted (Rs 4,875 crore).
The three companies will utilise the proceeds for lending operations and to meet debt obligations. All the issues will close on March 15, barring IRFC which would close on March 13.
These three will be in addition to two other issues launched last week by Power Finance Corp and Housing and Urban Development Corporation (HUDCO) to mop-up around Rs 600 crore.
All the five firms are issuing second tranches of their tax-free bonds.
Experts say that volatile conditions in equity markets have led to companies tapping the debt route for funds, while retail investors are also warming up to tax-free bonds due to higher returns than the traditional deposit products.
Retail Investors are being offered interest rate between 7.38% and 7.69% per annum. The bond tenures range between 10 years and 15 years.
In the first tranche, IRFC, the fund mobilising arm of the Indian Railways, had raked in close to Rs 5,350 crore through its tax-free bond issue, IIFCL had raised Rs 2,884 crore and REC had garnered Rs 2,017 crore.
HUDCO, a financial institution that provides long-term finance for housing and urban infrastructure projects, had hit the market on February 21. The issue size is Rs 500 crore with an option to retain over-subscription up to Rs 2,805 crore. In the first tranche, HUDCO had raised Rs 2,195 crore.
PFC's Rs 100 crore bonds opened for subscription on February 18 and has an option to raise up to Rs 3,890 crore.
As per IIFCL, this is the second such bond issuance after closure of first tranche in January 11. Government had authorised IIFCL to issue infrastructure tax-free bonds up to Rs 10,000 crore during 2012-13.
