NHAI to retire high-cost debt

The National Highways Authority of India (NHAI) will redeem Rs 804 crore worth of market bonds issued in 2001 within three years of their issuance to reduce high-cost debt burden and borrow afresh at lower rates. It plans to carry out the exercise by the end of this year.

"When the bonds were originally issued, the rates of interests were reigning at 8.5 per cent, while at present the rates are in range of 5-5.5 per cent. We, therefore, want to redeem these bonds at the earliest, to save on the interest cost," an NHAI official said.

He added that three years was the minimum period the authority was required to hold these bonds for.

The fourth tranche of bonds were issued in November 2001, with a tenure of three, five and seven years. The terms of issue of the bonds, authorise the NHAI to exercise a call option for redeeming the bonds at the face value of Rs 10,000 after at least 3 years, which means the bonds can be redeemed by November this year.

The official said that the authority was comfortably placed in terms of finances at present and thus had no immediate plans for market borrowing. He said that the NHAI might go in for a fresh round of market borrowings worth Rs 4,500 crore in December 2004.

"We have estimated that during 2004-05 the authority will incur a total expenditure of Rs 14,000 crore, a part of which is proposed to be met through these borrowings," the NHAI official said.

Other sources of finance like multilateral agencies will also be tapped by the NHAI, with Rs 7,000-8,000 crore of support expected from agencies like World Bank and Asian Development Bank.

The NHAI is authorised to raise money through tax-free bonds issued under section 54 EC of the Income Tax Act, to meet the expenditure on the road projects undertaken under the Rs 58,000-crore National Highway Development Programme (NHDP). The bonds are exempt from long-term capital gains tax.