IFCI has come out with the first infrastructure bond issue of this year, and I was a bit surprised to see how early they came out with the issue this time.
They had to come out with several tranches last year because they were never able to reach their targets, and I think the same thing is going to happen this year as well.
They will come out with several tranches and so will the other players who are allowed to issue infrastructure bonds.
I had written a fairly comprehensive post on Section 80CCF infrastructure bonds FAQ last year, and you can read that post and the comments to familiarize yourself with these bonds if you aren’t already aware of them or need a refresher.
I think it’s too early to buy these infra bonds right now, and it’s better to wait for a few more issuers to come out with their issues. Don’t expect a much higher interest rate from the other issuers though because the interest that they can offer is capped, and the interest rate difference isn’t going to be much.
The other thing that I want to emphasize is that the real benefit of these bonds is that they allow you tax benefits to the tune of Rs. 20,000 over and above what you save by investing in Section 80C instruments, so if you don’t think you will be able to max out Rs. 1 lakh investment in 80C, then don’t bother with these bonds.
I’m going to review each of these issues in detail, and use this page as a calendar and summary page for every infrastructure bond issued.
If you want to see some more details on the issue then let me know and I will modify the table.
S.No. | Issuer | Series | Tenure | Open & Close Date | Interest Rate |
1 | IDFC Tranche 2 | Series 1 | 10 years with a buyback option at 5 years | Jan 11 2012 – Feb 25 2012 |
8.70% |
2 | IDFC Tranche 2 | Series 2 | 10 years with a buyback option at 5 years | Jan 11 2012 – Feb 25 2012 |
8.70% compounded annually |
3 | Srei Infrastructure Finance | Series 1 | 10 years with a buyback option at 5 years | Dec 31st 2011 – Jan 31st 2012 |
8.90% |
4 | Srei Infrastructure Finance | Series 2 | 10 years with a buyback option at 5 years | Dec 31st 2011 – Jan 31st 2012 |
8.90% but compounded and will be paid at maturity |
5 | Srei Infrastructure Finance | Series 3 | 15 years with a buyback option at 5 years | Dec 31st 2011 – Jan 31st 2012 |
9.15% |
6 | Srei Infrastructure Finance | Series 4 | 15 years with a buyback option at 5 years | Dec 31st 2011 – Jan 31st 2012 |
9.15% but compounded and will be paid at maturity |
7 | REC | Series 1 | 10 years with a buyback option after 5 years | Dec 19 2011 – Feb 10 2012 |
8.95% but compounded and will be paid at maturity |
8 | REC | Series 2 | 10 years with a buyback option after 5 years | Dec 19 2011 – Feb 10 2012 |
8.95% annual |
9 | REC | Series 3 | 15 years with a buyback option after 7 years | Dec 19 2011 – Feb 10 2012 |
9.15% but compounded and will be paid at maturity |
10 | REC | Series 4 | 15 years with a buyback option after 7 years | Dec 19 2011 – Feb 10 2012 |
9.15% annual |
11 | L&T Infra | Series 1 | 10 years with a buyback option after 5 years | Nov 25Â 2011- Dec 24 2011 |
9.00% payable annual |
12 | L&T Infra | Series 2 | 10 years with a buyback option after 5 years | Nov 25Â 2011- Dec 24 2011 |
9.00% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
13 | IFCI Infra Series IV | Series I | 10 year with 5 year buyback | Nov 30 2011- Jan 16 2012 |
9.09% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
14 | IFCI Infra Series IV | Series II | 10 years with a buyback option after 5 years | Nov 30 2011- Jan 16 2012 |
9.09% payable annual |
15 | IFCI Infra Series IV | Series III | 15 years with a buyback option after 5 years | Nov 30 2011- Jan 16 2012 |
9.16% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
16 | IFCI Infra Series IV | Series IV | 15 years with a buyback option after 5 years | Nov 30 2011- Jan 16 2012 |
9.16% payable annual |
17 | IFCI | Series III – Option 1 | 10 years | Sept 21 2011 – Nov 14 2011 |
8.5% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
18 | IFCI | Series III – Option II | 10 years | Sept 21 2011 – Nov 14 2011 |
8.5% payable annual |
19 | IFCI | Series III – Option III | 15 years | Sept 21 2011 – Nov 14 2011 |
8.75% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
20 | IFCI | Series III – Option IV | 15 years | Sept 21 2011 – Nov 14 2011 |
8.75% annual |
21 | PFC | Series 1 | 10 years with a buyback option after 5 years | Sep 29 2011 – Nov 4 2011 |
8.5% interest payable annual |
21 | PFC | Series 2 | 10 years with a buyback option after 5 years | Sep 29 2011 – Nov 4 2011 |
8.5% interest cumulative payable at the end of the term |
22 | PFC | Series 3 | 15 years with a buyback option after 7 years | Sep 29 2011 – Nov 4 2011 | 8.75% payable annual |
23 | PFC | Series 4 | 15 years with a buyback option after 7 years | Sep 29 2011 – Nov 4 2011 | 8.75% cumulative payable at the end of the term |
24 | IDFC | Series 1 | 10 years with a buyback option after 5 years | Nov 21st2011- Dec 16 2011 | 9.00% payable annual |
25 | IDFC | Series 2 | 10 years with a buyback option after 5 years | Nov 21st2011- Dec 16 2011 | 9.00% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
I haven’t found their prospectus yet and this info is sourced from Moneyvriksh – when I get hold of the prospectus – I will do a more detailed post.
Update 1: Fixed Option 2 interest payment detail per Shiv’s comment
Update 2: Including Option 2 per comment from Shiv (who you can contact to invest in Infrastructure Bonds & Save Tax u/s. 80CCF at [email protected])
sir , i was bought l&t infra bond rs 20000/ at dec/11. through karvy stock broking . still today i du not received any original bond cirty ficate. so pl. confirm what is the status of my bond. i am leaving at. village. my cell no is 7046599890 mr chandubhai r patel. call soon or reply pl. my email
my acknoledge deatils as below
apli.no 24815946 rs, 20000/ cumulative option.cheque from dena bank.
thanks
c r patel.
Hi Manshu.. IDFC has approved the prospectus for Tranche 3 of Infrastructure Bonds which will open on March 19th & close on March 30th.
Thanks for that info Shiv – I’ll update this post with it later on.
hi manshu,
i want to clear my doubts regarding IT deduction under section 80 CCF and 80 D.
After so much inquiry I found the line -‘Rs.20000 is deductible from taxable income’ in case of 80 ccf and ‘Rs.15000 (individual) and Rs.20000 (parents) is deductible from taxable income’ in case of 80 D.
for example :-
Ist example
if my annual income is Rs.400000
(-) deduction upto Rs.290000 (190000+100000)
(-) investment under 80ccf Rs. 20000 (deduction under infra bond)
Total taxable income Rs.90000
income tax will be Rs.9000 (10%)
2nd example
if my annual income is Rs.400000
(-) deduction upto Rs.290000 (190000+100000)
(-) investment under 80ccf Rs. 2060 (10.3% of 20000) (deduction under infra
bond)
Total taxable income Rs.107940
income tax will be Rs.10794 (10%)
my question is which example is correct and right and also in case of 80d which example will be applicable.
kindly reply me soon
thanks
Hi Mohini.. 1st example is correct and applicable in case of 80D also.
thanks mr kukreja.
Shiv,
I am still waiting to hear from you.
Hi Ankur.. I’m yet to get any convincing answer to your query. I consulted 3-4 CAs in my circle and they were also unaware of its treatment. In case I get a concrete reply with some documented evidence, I’ll surely let you know.
Hi,
I just checked IDFC website, the tranche 2 has been extended till feb 25th.
Regards,
Karthik
Hi Mr. Karthik.. IDFC Tranche 2 issue is supposed to close on February 25th, 2012, from the beginning itself. Hence, it is not an extension.
Hi Manshu… IFCI has extended the closure date of its Infra Bonds issue to February 8th, 2012. It is a good news for people who wanted to invest in IFCI bonds at 9.09% or 9.16% with 5 years lock-in period. I wonder why IDFC and L&T did not extend their closure dates in December when it was known to them that they wont be able to offer 9% rate of interest in the coming months due to falling G-Sec yields. They could have collected much more money from the investors.
Can we have the ratings in the table
REC,IDFC, L&T infrasructure bonds are available in the market and REC offers sightly high interest than the rest two,could you plz tell me which one is more safe invest?
thanks
jolly
Hi Jolly… all these issues are quite safe to invest. IDFC issue is ‘AAA’ rated and ‘Secured’, L&T issue is ‘AA+’ rated and ‘Secured’ and REC issue, though not rated and ‘Unsecured’, is also quite safe as it comes from “A Navratna Public Sector Enterprise”. It is very difficult to conclude which one is MORE SAFE to invest among these three.
IDFC tranche 2 is expected to be from 11 Jan to 25 Feb: http://www.equitybulls.com/admin/news2006/news_det.asp?id=99494
Anybody knows the G-Sec interest rate of 31 Dec, since that will be the cap on the rate of these bonds?
Hi… ya it is coming from January 11th, with a lower rate of interest of 8.70% as compared to 9% which was there in the 1st tranche. L&T Infra Bonds – Tranche 2 is also opening on January 10th with same 8.70% interest rate. Other terms are absolutely same as they were in Tranche 1.
Thanks Paddu, Shiv – updated table and will write a quick post soon.
I have heard about IDBI infrastructure bonds and that last year they had come during Jan. Any information regarding them? I dont see them in the infrastructure bond calendar either. My husband has missed to apply for other bonds that were open earlier, hence thinking of either IFCI or if IDBI would open in near future. Please suggest.
Thanks,
Sunita
Hi Shiv,
Given that SREI bonds are secured while REC/IFCI are unsecured, would REC still be the best option?
Hi Manshu,
Would the secured/unsecured factor be significant enough to include in the comparison table that you have made?
Regards,
Haresh.
At present REC bonds are the best option, although they are unsecured, as it is a private placement, where as the SREI bonds is a public issue, which can only be made against security of underlying assets & hence it is secured.
Secured/Unsecured bonds hence does not really make a difference in such a case & cannot be compared. All unsecured bonds are being issued by government undertakings.
Hi Manish.. it is not always be the case. PFC issued Infra Bonds which was a Public Issue and the bonds were Secured.
Hi Haresh.. SREI Infra Bonds are Secured as the equivalent assets must have been leveraged to make it secured but I would still say REC offering is better as it is a Govt. controlled corporation and also the rate of interest is higher. Secured & Unsecured thing does make a difference but not that much. If a similar company like PFC comes out with a Secured Infra Bonds @ 8.90%, I would take that.
Hi Manshu / Shiv,
Indian infrastructure financing company SREI Infrastructure Finance Ltd’s long-term infrastructure bonds issue, through which it plans to raise Rs 3 billion in the first tranche, hit the market on Saturday, 31/12/2011.
The bonds have a face value of Rs 1,000 and comes with two maturity periods of 10 and 15 years and a lock-in period of five years. The bonds will be issued in four series with an annual interest rate of 8.90% for series 1 and 2, and 9.15% for series 3 and 4.The issue will remain open for subscription till January 31.
Regards,
Manish.
Hi Manish… ya I checked it last week only. Again, I would prefer 8.95% REC Bonds over 8.9% SREI Infra Bonds.
Thanks for that info Manish – I think I should do a post on this as well since I’ve written about all the other infra bonds prior to this. Will update the calendar as well – thanks!