There is one new and interesting thing about this offer which I’ll come to in a while but before that let’s take a look at the other regular details of these bonds.
There will be two series – one with a 10 year maturity, and the second one with the 15 year maturity, and the interest on both options will be paid annually.
The issue is going to open on January 27th 2012 and is planned to close on the February 10 2012. You have to invest a minimum of Rs. 10,000 and since one bond has a face value of Rs. 1,000, you can invest in Rs. 5,000 multiples after that.
The issue size is Rs. 6,300 crores and the issue has been rated CRISIL AAA and CARE AAA by CRISIL and CARE respectively; this of course is their highest rating. ICRA has rated it AAA as well.
30% of the issue is reserved for the retail investors and this is important because retail investors will get a higher interest rate than other class of investors. An individual investing less than Rs. 5 lakhs will fall under the retail category.
The bonds will also list on the NSE and BSE.
Here are the details of the issue in a snapshot.
|Option||Series I||Series II|
|Face Value||Rs. 1,000||Rs. 1,000|
|Minimum Investment||Rs. 10,000||Rs. 10,000|
|Tenor||10 years||15 years|
|Interest Rate: Retail Investors||8.15%||8.30%|
|Interest Rate: Other Investors||8.00%||8.10%|
As you can see the interest rate that retail investors get is a tad higher than the other categories and they have put in a condition to say that only the first allottee will get the higher rate. So, if you want the higher interest you must subscribe to the issue. If you buy it from the stock exchange then you will not get the retail investor interest rate even if you are a retail investor. You will get the lower interest rate.
This is a clever way of first of all giving an incentive to retail investors to subscribe to the issue and then reduce the overall interest burden because some people will end up selling the bonds in the market and then Indian Rail will not have to pay the higher interest rate for them.
I think this should speed up the subscription of the retail part which was lagging so far in the other issues, and I think this will catch the interest of NRIs as well who can invest in these bonds under either category.
The tax free offers that are coming out right now are fairly good deals and if you are looking for fixed income products then you can consider this issue.
Update: Corrected the face value from Rs. 5,000 to Rs. 1,000 and added ICRA’s credit rating per Shiv’s comment below.Â