Email question on IFCI Bonds

by Manshu on November 25, 2010

in Fixed Deposits

I got this email about the IFCI bonds, and I thought I’d paste my response here as well.

Q.

are these bonds same as shares
can we sell it on market or we have to sell it to the company itself
what is the locking period

A.

No, these bonds are not same as shares. Share prices go up and down every day, and can be quite volatile. Also, there is no guarantee that you will get a certain amount back at the end of the tenure.

These bonds will be locked in for 5 years, so you will not be able to trade them for that much time. They will then be listed on an exchange but will not be as volatile as regular stocks. They will pay you an interest, and also save tax which is not something stocks do. Think of bonds more like a fixed deposit than a stock.

Feel free to weigh in on the response, and add your comments!

{ 28 comments… read them below or add one }

Ravikumar November 25, 2010 at 6:14 am

Once listed in exchange, based on what factors will the price of these bonds change?

Reply

Manshu November 25, 2010 at 6:35 am

My knowledge of how bond listing works in the real world is very limited, so I can’t be sure of what really happens.

The recent SBI bond issue listed with a 5% gain, and the two most important factors as far as I know is the current interest rate scenario vis-a-vis the coupon on the bond, and the credit quality of the issuer.

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Deepak Patel November 29, 2010 at 1:24 am

When L & T Infra Bond will be issues or credited in Demate Account. I applied for it and I don’t have knowledge about it. So can you please let me know what will happen after apply and when ? Thanks

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Manshu November 29, 2010 at 8:07 am

There’s really no news on when the L&T bonds will be credited, so I can’t say for sure. But if I hear anything I’ll write a post or leave a comment here or something.

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lalit kumar sarswat November 29, 2010 at 7:00 am

sir i am lalit kumar sarswat

My Application Number
1- 1270590
2-1270548
3-1270511
4-1270504
5-1270520

Reply

Manshu November 29, 2010 at 8:02 am

I’m not sure I understand; have you applied for IFCI and want to know the status now?

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Y K Mohan December 5, 2010 at 11:37 pm

I do not have Demat account. Can I purchase IFCI Infra bonds in physical form?

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Manshu December 6, 2010 at 4:46 am

No, because they have made it mandatory to have a demat account in order to buy the bonds.

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Manshu December 12, 2010 at 5:10 am

Hi, I just wanted to let you know that they have made some changes to the terms and it’s possible to buy the bonds in physical form also now.

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M C Goel December 13, 2010 at 6:40 am

How can I buy the IFCI infrastructure bonds online. I have a demat account

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Manshu December 13, 2010 at 7:25 am

IF you have a trading account like say ICICI Direct or something you can go to its IPO section, and you should find this option there.

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R.Ram Babu January 9, 2011 at 2:21 am

Want to know will there be any TDS deduction on redemption. (or will it be as per the prevailing laws?

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Manshu January 9, 2011 at 7:16 am

The thing with this is that initially these bonds were issued as only Demat, which means that there is no TDS, but then later on they added a physical form also, but there is no clarification if there will be a TDS or not, or will there be a TDS on the physical format, so I’m not very confident on which way the tax will be deducted.

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Deepa Khurana January 9, 2011 at 11:23 pm

Do IFCI Infrastructure Bonds ensure capital safety and assured interest rate?

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Manshu January 10, 2011 at 5:03 am

Deepa – They are unsecured bonds, which means that if the company goes bankrupt, and the shareholders get wiped off then there can be a question mark on the capital and interest.

Other than that – yes – in normal course the interest rate is assured. All infra bonds so far have been unsecured, and I expect future issues to be unsecured as well.

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shvet January 10, 2011 at 5:57 am

Can an acknowledgement receipt submitted as an investment proof ?

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Manshu January 11, 2011 at 8:39 am

I don’t know Shvet – you could try out asking your company’s tax folks if they will accept it, and if not, then what else can be submitted. I don’t recall anyone else mentioning that they have been allowed to do so.

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Kailash January 10, 2011 at 11:01 pm

How can we find the status of application of IFCI Infrastructure bonds through Internet?

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Manshu January 11, 2011 at 8:44 am

I don’t think there is any provision to do that yet Kailash. They might come up with a site later that allows you to download allotment advice like the IDFC bond, but it can’t be done yet.

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priyalal adhikari January 17, 2011 at 8:57 pm

if i will buy infra bond for Rs.20000/- then should i get tax benifit of Rs.6180/-(incl 3% EC)

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Manshu January 18, 2011 at 2:39 am

Yes that’s right. Here is a detailed post that I did some time ago that shows how this yield is calculated.

http://www.onemint.com/2010/10/30/how-do-the-issuers-calculate-yield-for-tax-saving-bonds/

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New User January 31, 2011 at 10:51 am

Is there an option to check the status of the purchased bonds through the internet as I’ve not received any communication about the same after I’d purhased 4 IFCI bonds.

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Manshu February 1, 2011 at 8:47 am

No, not yet, and in future please use your initials or something as these type of test ids and names have a higher chance of going into spam, and it’s difficult for me to keep track of who I am engaging with.

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Amit February 3, 2011 at 3:09 pm

Thanks. Can the acknowledgement receipt of the bonds be considered during tax declarations?

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Manshu February 4, 2011 at 11:25 pm

Amit – people here have mentioned that some of their offices have allowed to use the receipt as proof so you may try as well. In general, I’ve noticed there is not much consistency in what different offices accept.

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Karajgar Ranjan Balkrishna September 17, 2011 at 8:05 pm

I am having Millionaire Bond, Folio No.5423-570, Certificate No.306876, Issue Price Rs.5000. Due to some financial problem, I would like to opt for Early Redemption of this Bond. The due date is 30.9.2011. Kindly advise me formalities to be completed towards this. Regards.
RB Karajgar
Mob.No.09425013766
Present Add : 214, Phase-III, Garden Home, City Centre, Gwalior – 474011 (MP)

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Manshu September 18, 2011 at 10:38 pm

This is like a news website like TOI – please talk to your agent / broker to get this info.

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MANGILAL JAIN December 10, 2011 at 2:19 pm

Sir,

I had submitted application for issue of bond APPLICATION NO 30940 ON 28-10-2011FOR RS. 20000/- THROUGH HDFC BANK JODHPUR .UP TO WHAT DATE I WILL RECERIVE THE BONDS.

HOW I CAN CHECK STATUS

THANKS

Mangilal jain

Reply

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