Friends,
The finance minister Pranab Mukherjee in this year’s Union Budget proposed infrastructure bonds under Section 80CCF. According to the proposal, individuals can invest up to Rs 20,000 in these bonds in addition to the Rs 1-lakh limit available under Sections 80C, 80CCC and 80CCD.
These bonds can be issued by entities such as LIC , IDFC, IFCI or any other NBFC as classified by the RBI. Earlier in September, IFCI had issued these bonds on a private placement basis. Now, IDFC has decided to offer the first tranche of these bonds to the public. It plans to raise Rs 3,400 crore through such infrastructure bonds in one or more tranches during FY11. The government of India is IDFC’s single largest shareholder and it provides a range of financing solutions to the infrastructure segment in India.
IDFC offers four different investment options. The face value of each bond is Rs 5,000 and you can apply for a minimum of two bonds and in multiples of one bond thereafter. All the four options have a tenor of 10 years and a lock-in of five years. At the end of five years, you can sell series 1 and 2 on the stock exchanges. IDFC offers a buy-back facility for option 3 and 4 at the end of five years. While series 1 and 2 offer an annual interest rate of 8%, series 3 and 4 offer a interest rate of 7.5%.
Series 1 and 3, give interest on an annualised basis, while series 2 and 4 give interest on a cumulative basis. The bonds shall be issued in the demat form only. Hence it is necessary to have a demat account to apply for the same. The issue closes on October 18, 2010. The maximum amount of income not chargeable to tax in case of individuals (other than women assesses and senior citizens) and HUFs is Rs 1,60,000. In the case of women assesses the limit is Rs 1,90, 000 and in the case of senior citizens it is Rs 2,40,000 for FY10. Hence those whose income exceeds these slabs can go for these bonds.
The finance minister Pranab Mukherjee in this year’s Union Budget proposed infrastructure bonds under Section 80CCF. According to the proposal, individuals can invest up to Rs 20,000 in these bonds in addition to the Rs 1-lakh limit available under Sections 80C, 80CCC and 80CCD.
These bonds can be issued by entities such as LIC , IDFC, IFCI or any other NBFC as classified by the RBI. Earlier in September, IFCI had issued these bonds on a private placement basis. Now, IDFC has decided to offer the first tranche of these bonds to the public. It plans to raise Rs 3,400 crore through such infrastructure bonds in one or more tranches during FY11. The government of India is IDFC’s single largest shareholder and it provides a range of financing solutions to the infrastructure segment in India.
IDFC offers four different investment options. The face value of each bond is Rs 5,000 and you can apply for a minimum of two bonds and in multiples of one bond thereafter. All the four options have a tenor of 10 years and a lock-in of five years. At the end of five years, you can sell series 1 and 2 on the stock exchanges. IDFC offers a buy-back facility for option 3 and 4 at the end of five years. While series 1 and 2 offer an annual interest rate of 8%, series 3 and 4 offer a interest rate of 7.5%.
Series 1 and 3, give interest on an annualised basis, while series 2 and 4 give interest on a cumulative basis. The bonds shall be issued in the demat form only. Hence it is necessary to have a demat account to apply for the same. The issue closes on October 18, 2010. The maximum amount of income not chargeable to tax in case of individuals (other than women assesses and senior citizens) and HUFs is Rs 1,60,000. In the case of women assesses the limit is Rs 1,90, 000 and in the case of senior citizens it is Rs 2,40,000 for FY10. Hence those whose income exceeds these slabs can go for these bonds.
Main features of IDFC issue are given below:-
Issue Structure:
*Maturity: The Bonds, with a maturity of 10 years, will be issued in 4 series.
*Face Value: Each Bond of face value of Rs 5,000 each.
*Minimum application: Rs 10,000 or 2 bonds. The bonds can be of the same series or 2 bonds across different series.
*Lock in: 5 years from the date of allotment.
*Buyback facility: Available for Series 3 & 4 only.
Issue summary
*Issue opens: 30th Sept 10
*Issue closes: 18th Oct 10
*Lead managers: ENAM Securities Private Limited, Citigroup Global Markets, Kotak Mahindra Capital Co. Ltd
*Registrar: Karvy Computershare Pvt. Ltd.
*Debenture Trustees: IDBI Trusteeship Services Ltd.
Credit rating by ICRA
Rating
Issue Type
LAAA
Infrastructure Bonds
The rating of ICRA indicates highest safety and stable outlook. The ratings provided by CARE may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any other rating.
Issue Structure:
The Bonds, with a maturity of ten years, will be issued in four series.
· Series-1: Carry a 8% coupon, payable annually
· Series-2: Cumulative option, 8% coupon, compounded annually
· Series-3: Carry a 7.50 % coupon, payable annually; with a buyback option
· Series-4: Cumulative option, 7.50% coupon, compounded annually; with a buyback option
Why Go For It?: This limit of Rs 20,000 per annum is in addition to Sections 80C, 80CCC and 80CCD. IDFC is a premier infrastructure finance company. Hence, investors can consider applying in this issue. Hence it makes sense to apply.
