Fintotal News Analysis | HUDCO and IRFC Tax-Free Bonds Issue Open
HUDCO and IRFC Tax-Free Bonds Issue Open
Ruby Jacob, 07 Feb 2012

Bonds issue of Housing and Urban Development Corporation (HUDCO) and Indian Railways Finance Corporation (IRFC) opened on 27 January  2012. Issue of IRFC bonds closes on 10th Feb 2012 and that of HUDCO closes on 6th Feb 2012.  Both bonds will list on NSE and BSE.

HUDCO and IRFC bonds are tax-free bonds which means interest earned on them is tax-exempted under section 10(15)(iv)(h) of the Income Tax Act 1961. These are unlike infrastructure bonds which make the principal invested eligible for tax exemption under section 80 CCF and whose interest earnings are taxable. 

HUDCO is a government owned public sector firm that finances housing and urban infrastructure in the country. Corpus raised from the bonds issue will be used for funding its projects. HUDCO targets to raise Rs 4685 crores through the issue. The bonds have a face value of Rs 1000 and the minimum subscription amount is Rs 10,000.

HUDCO bonds with maturity of 10 years have a coupon rate of 8.22% while the 15 year maturity bond has coupon rate of 8.35%. The rates applicable for HNIs and QIBs are 8.10% and 8.20% respectively. Coupon rates mentioned for retail investors are applicable only when the bonds are purchased in the primary market, i.e, during their time of issue.  The bonds have been rated AA+ by CARE and Fitch.

IRFC is a subsidiary of Indian Railways. It intends to raise Rs 6300 crores for railway projects and acquiring stock. These bonds also have a face value of Rs 1,000. Minimum subscription is Rs 10,000 and further purchases can be made in multiples of Rs 5,000.

Bonds with maturity of 10 years carry a coupon rate of 8.15% and those with maturity of 15 years a rate of 8.30% for retail investors. Applicable rates for HNIs and QIBs are 8% and 8.10% respectively.  These bonds have a higher rating of AAA.

Infrastructure bonds with open issue are REC and PFS. Each of them has face value of Rs 5,000 and can be purchased in multiples of one bond. Up to Rs 20,000 invested in them can be claimed for tax exemption under section 80 CCF which is apart from the section 80 C benefits of Rs 1 lacs.

REC bonds have coupon rate of 8.95% for 10 year bond and 9.15% for 15 year bond.   The bonds have buyback option at the end of 5 years for the 10 year bond and at the end of 7 years for the 15 year bond. The issue closes on 10 Feb 2012.

PFS bonds have coupon rate of 8.93% for 10 year bond and 9.15% for 15 year bond. They have buyback option every year after 5 years for the 10 year bond and after 7 years for the 15 year bond. The issue closes on 29 Feb 2012.

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