Prajna Capital

NHAI Tax Free Bonds
Good response for L&T Long Term infrastructure bonds
Muthoot Finance new NCD offers up to 13.43%
NHAI Tax Free Bonds can deliver high Capital Gains when Interest Rates Fall

Posted: 29 Dec 2011 04:11 AM PST

UNFAZED by uncertainty in the capital markets, the National Highways Authority of India (NHAI) will launch its first ever tax-free bonds issue of Rs 10,000 crore on December 28.

The issue will close on December 30, a senior road transport ministry official said.

The official further said the interest (coupon) rate of the bonds issue will be between 8 and 8.5 per cent, while refusing to disclose the exact number.

"A formal announcement will be made by road transport minister CP Joshi and you should wait for that," the official said, adding that the money raised from it will be used to partly finance various national highways projects under different government schemes.

"Some money will also be used for viability gap funding for BOT (build-operate transfer) road contracts," the official added.

As per the prospectus filed by NHAI with the market regulator, the Securities and Exchange Board of India (Sebi), the bonds will have two maturity periods of 10 and 15 years, and would get listed on the BSE and the National Stock Exchange.

In this year's budget, the government had allowed NHAI to raise Rs 10,000 crore from the tax-free bonds, an instrument never used by it earlier. Till now, it used to raise funds through issue of 54EC bonds, under which subscribers can claim exemption of capital gains tax.

Citing the provisions of income tax rules, the NHAI prospectus has, however, clarified that only the interest earned on the new bonds will be tax-free, not the actual investments.

Moreover, investors will be liable to pay capital gains tax as applicable, it further said.

According to the NHAI prospectus, the bonds issue will worsen its debt-to-capital ratio from 0.11 to 0.29 if it raises Rs 10,000 crore from the markets. The debt-to capital ratio reflects the financing strengths of a firm.

Higher the ratio, the more debt the company has, compared to its equity.

As of June 30, the NHAI's total debt (including secured loans) stood at Rs 6,636.21 crore.

The bond issue has got AAA (stable) rating from the three agencies — Crisil, CARE and Fitch.

SBI Caps, ICICI Securities, Kotal Mahindra Capital and AK Capital Services have been appointed as the lead managers by the NHAI for the bonds issue.

How to apply?

You can download the forms below

Download Application Forms

Submit the filled up form to Collection canter near you

Good response for L&T Long Term infrastructure bonds

Posted: 28 Dec 2011 06:45 PM PST

Current open Long Term Infra Bond Application form

AFTER the success of IDFC's long-term infrastructure bonds, L&T Infrastructure Finance's infra bonds are attracting good response, indicating retail investors preference for safe and stable investment options, amid a weak equity market.

L&T Infrastructure Finance, a finance subsidiary of Larsen & Toubro (L&T), expects to mobilise around Rs 600 crore from the long term infrastructure bonds, which closes on December 24, according to a person close to the development.

He said the investor response is in line with the company's expectations and he believes that, now, investors are more forthcoming, because they have understood the importance of the tax-saving instrument, which also yields annual and cumulative interest benefits at 9 per cent.

The person said L&T is expected to get close to 300,000 applications this time.

A banker, who is part of the issue, says these bonds are an added attraction because they provide an additional Rs 20,000 tax savings under Section 80CCF, which is over and above Rs 100,000 under Section 80C of the Income Tax Act.

The response to the issue has been decent compared with last year, and L&T would definitely see a comparable response to its issue compared with IDFC.

It's that time of the year when employees have to submit their investment proofs to avail tax benefits and we have noticed that a lot of investors are coming for L&T bonds after the IDFC issue closed.

On Tuesday, IDFC announced that it has raised around Rs 538 crore from the first tranche of its long term infra bonds, which is 14 per cent higher than the first tranche of last year's bonds.

L&T bonds have buyback options after five and seven years and would be listed on the Bombay Stock Exchange after a five-year lock-in period.

L&T Infrastructure Finance launched the first tranche of its Rs 1,100 crore long-term infra bonds in two series with 9 per cent coupon rate on November 25.

Retail investors can subscribe to a minimum of five bonds and in multiples of one bond thereafter. Each bond would have a face value of Rs 1,000.

The bonds will have a maturity of 10 years and a lock-in period of five years, with a buy-back option after the fifth year and the seventh year from the date of issue, the company said.

These bonds are options given to infrastructure finance companies (IFCs) to support lending requirements and avoid dependence on banks. IFCs are not allowed to take deposits from retail investors. L&T was given the infrastructure finance company (IFC) status in July 2010. It can, thus, access long-term funds to meet growth plans.
To add to this, the limit of bank financing and external commercial borrowings has also increased.

The company has a diversified disbursement mix with the power sector accounting for almost 39 per cent of its advances. Apart from this, the company also provides financing to telecom, roads, oil and gas, ports and other infrastructure sectors, such as logistics and special economic zones (SEZs).

---------------------------------------------

Application form for Applying for Tax Saving Long Term Infrastructure Bond

Current open Long Term Infra Bond Application form

Submit filled up application Collection canter near you

---------------------------------------------

Buy Tax Saving Mutual Funds Online by selecting the Mutual Fund Schemes

Mutual Funds Online

Download Tax Saving Mutual Fund Applications / Forms from all AMCs:

Download Mutual Fund Applications

Muthoot Finance new NCD offers up to 13.43%

Posted: 28 Dec 2011 08:34 AM PST

Download Application Forms

MUTHOOT Finance, a gold loan company, is launching its second public issue of non-convertible debentures (NCDs) this financial year, targeting to raise Rs 600 crore, including a green shoe option of Rs 300 crore.

The money raised is proposed to be used to repay loans and fund the company's business plans. The bonds have been rated AA/Stable by Crisil and AA/Stable by ICRA, which indicates high safety with relatively lower standing within the category.

The NCD issue will have four investment options with varying maturity tenures and coupon rate.

For a tenure of two years, the annual interest rate being offered is 13 per cent; for a tenure of three years, the rate is 13.25 per cent; for five years, the bonds will yield an interest rate of 13.25 per cent per annum, while in case, the investor holds the bonds for 5.5 years, he gets a return of 13.43 per cent per annum.

The minimum investment amount is Rs 5,000, said a press release. The NCDs, which opens on December 22 and closes on January 7, 2012, would be listed on the Bombay Stock Exchange, added the release.

The funds raised through this issue will be utilised for various financing activities, including lending and investments, to repay existing liabilities or loans and towards business operations, including capital expenditure and working capital requirements.

This would be the second NCD issue from the company this year. The first one was in August from which the company had mobilised about Rs 700 crore.

How to apply to Muthoot Finance NCD?

You can download the forms below

Download Application Forms

Submit the filled up form to Collection canter near you

NHAI Tax Free Bonds can deliver high Capital Gains when Interest Rates Fall

Posted: 28 Dec 2011 07:45 AM PST

Download NHAI Tax Free Bond Application Form

The . 10,000-crore National Highways Authority of India, or NHAI, bond offering, which opens for subscription on December 28, offers a good opportunity to investors to lock in funds at higher yields and earn tax-free interest income, according to wealth managers.

Apart from coupon rates in excess of 8%, NHAI bonds will start delivering high capital gains once interest rates start moving downwards.

Forty per cent of the . 10,000-crore issue is earmarked for institutional investors, 30% for retail investors and high net worth individuals. The bonds will have differential coupon rates of 8.2% for 10 years and 8.3% for 15 years, merchant bankers say.

The NHAI issue presents a good opportunity for investors to lock money in triple-A-rated sovereign-like bonds at higher yields. Apart from high coupon rates and safety, these bonds will be very liquid because of the large float. Investors will easily be able to buy and sell these bonds on the exchange.

These should be a part of the core fixed income portfolio.

National Highways Authority of India will use the issue proceeds to part fund land acquisition, meeting viability gap funding and annuity payments among others.
According to wealth managers, tax-free bonds — even if it bears a lower pay-out rate than G-Secs and corporate bonds — are good bets for investors in the current scenario as not many asset classes are generating near-8% risk adjusted (tax-free) returns. Despite 10-year G-secs and bank fixed deposits yielding 8.3% and 9.25%, respectively, wealth managers expect the bond to attract investments because of its tax-free status.

An 8% tax-free coupon rate is very much comparable to an investment product that delivers 12% pre-tax returns. This issuance is even better than bank fixed deposits, which are currently giving about 9% (pre-tax) returns.

Also, with interest rates expected to slide over the next few months, money managers are hoping to generate higher returns by selling these bonds at a relatively higher coupon rate. In the event of a fall in interest rates, wealth managers expect 5-10% price appreciation on premature encashment of the bond.

How to apply to NHAI Bonds?

You can download the forms below

Download Application Forms

Submit the filled up form to Collection canter near you

---------------------------------------------

Application form for Applying for Tax Saving Long Term Infrastructure Bond

Current open Long Term Infra Bond Application form

Submit filled up application Collection canter near you

---------------------------------------------

Buy Tax Saving Mutual Funds Online by selecting the Mutual Fund Schemes

Mutual Funds Online

Download Tax Saving Mutual Fund Applications / Forms from all AMCs: