REC Tax Free Bonds Review

by Manshu on March 4, 2012

in Fixed Deposits

This post is the old post that talks about the REC 2011-12 issue, please read about the current REC tax free bonds 2012-13 issue here. 

REC (Rural Electrification Corporation) is going to issue tax free bonds and the issue will open on March 6 2012 and will close on the 12th of March 2012. They had issued infrastructure bonds earlier, and these tax free bonds should not be confused with them.

When you buy 80CCF infrastructure bonds, the amount you invest in those bonds get reduced from your taxable income but in these bonds that’s not going to be the case. The interest on these bonds will be tax free and they are similar to the other tax free bonds like the HUDCO, NHAI and PFC issues. For the two of you interested in knowing this – these bonds are tax free under Section 10(15)(iv)(h) of the Income Tax Act.

Now on to the issue itself and let’s start with the high credit rating that the issue has got. The REC tax free bond issue has been given the highest rating by all issuers since the government owns the majority stake (66.8%) in REC, it has been consistently profit making,  this is a secured issue, and it has also been granted the Navratna status by the government. The issue is rated  “CRISIL AAA/Stable” by CRISIL, “CARE AAA” by CARE, “Fitch AAA(ind)” by FITCH and “[ICRA]AAA” by ICRA.

This is a Rs. 30 billion or Rs. 3,000 crore issue and the minimum application size is Rs. 5,000 with each bond having a face value of Rs. 1,000.

There are two series which will pay interest every year and the maturity on one series is 10 years while the other one is 15 years. The interest rate is slightly higher for retail investors and retail investors are defined as resident investors who invest less than Rs. 1 lakh in the bond issue.

Unfortunately for NRIs, they can’t invest in this bond issue – the prospectus doesn’t explain why NRIs are barred from investing in these bonds.

These bonds will list on the BSE and will only be issued in dematerialized form. Here are the details on these bonds.

 

Options Bond Series 1 Bond Series 2
Tenor 10 years 15 years
Interest for Retail Investors 8.13% 8.32%
Interest for Other Investors 7.93% 8.12%
Face Value Rs. 1,000 Rs. 1,000

If you compare this with any of the earlier issues you will see that the interest rate offered is very similar, and I think these bonds make a good investment option for the fixed income part of your portfolio especially if you are in the 30% tax bracket. Some people have lamented the fact that the interest is not reinvested automatically and you will have to find alternate means to reinvest that interest and if you need the money 10 or 15 years from now and aren’t interested in any interest income then that’s probably valid (although you should consider inflation in that case and also read my detailed post with the comparisons)but other than that I think these tax free bonds offer a good opportunity to take advantage of the high interest rate environment that prevails today. I think the slowing economy is going to force RBI to bring down rates and these type of rates aren’t going to be on offer for very long so waiting for better rates is not be very prudent at this stage.

I’m sure a lively discussion is going to take place on listing gains in the comments section, but I am neither knowledgeable enough to say how much listing gains you can expect nor am I interested in these short term gains so I’m not going to be of any use there. Anything else, leave a comment and I’ll try to answer it.

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{ 98 comments… read them below or add one }

Vimal Raj March 4, 2012 at 8:28 am

Thanks Manshu for providing such useful information.

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Manshu March 4, 2012 at 9:42 pm

Thanks for your comment, I’m sure I missed out a few other things which people will bring up in the comments.

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Amlan Basak March 4, 2012 at 9:08 am

Thanks Manshu.
Please let us know the location from where we can download the form. :)

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Manshu March 4, 2012 at 9:39 pm

Not sure about that yet, must be in the website of one of the brokers but I wasn’t able to locate it.

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Shiv Kukreja March 5, 2012 at 1:31 am

Hi Amlan & Manshu… Please find pasted below the link to download the REC forms:

http://sbicapsecu.co.in/pdfstamping/PDFBondMaster.aspx?SubBrokerName=ShivKumarKukreja

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Karthik Reddy Chintaparthi March 4, 2012 at 9:58 am

I could see that NHAI, PFC, IRFC have already alloted the bonds. When will HUDCO allot ? Does any one have any information ?

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Manshu March 4, 2012 at 9:41 pm

Don’t know that yet but will have a post ready when the dates are out or the allotment is done.

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Nitin March 4, 2012 at 10:10 am

Hi – Do we know what is the tax treatment for these bonds? What happens to my tax liability if I buy these and say sell them 5 years later (I am not looking for short term gains)?

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Manshu March 4, 2012 at 9:34 pm

AT that time the long term capital gains on bond sale will be applicable – whatever the rule is at that point. Right now, it’s 10% without indexation and 20% with indexation.

http://www.onemint.com/2011/04/11/capital-gains-and-dividend-taxes-on-shares-and-mutual-funds/

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Ajay March 7, 2012 at 12:27 pm

For these bonds per current rules the capital gain tax is 10 %. Please read from the page 115 of prospectus I have reproduced over here

“However as per third proviso to section 48 of Income tax act, 1961 benefits of
indexation of cost of acquisition under second proviso of section 48 of Income tax
Act, 1961 is not available in case of bonds and debenture, except capital indexed
bonds. Thus, long term capital gain tax can be considered 10% on listed bonds
without indexation”

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Manshu March 8, 2012 at 5:30 am

I wasn’t aware of this Ajay – thank you for bringing it to my notice and apologize for my error.

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Bhushan March 4, 2012 at 11:05 am

Hi Manshu,
Just curious about the listing of IRFC bonds. It listed couple of days back. The 7.90% interest 10 year bond is trading at Rs 1015 while the 8.1% 15 year bond is trading at 1005. I thought, being higher intereste rate and longer period, it should have traded at higher price. Could you please throw some light on this.
Thanks,
Bhushan.

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Manshu March 4, 2012 at 9:29 pm

I’m not very knowledgeable on this but I’d expect the higher interest rate one to be pricier, not sure why that’s not the case, probably just an anomaly due to lack of liquidity.

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Nitin March 4, 2012 at 9:55 pm

Bond prices are inversely related to Interest Rate (Coupon). So higher interest rates mean lower trading prices.

Think of it this way. There is a bond of face value 10000 which offers a fixed 8% per annum for the whole tenure. If you are to get an interest income of 4000 a year, you need to buy 5 bonds at face value or invest Rs. 50,000. If the market interest rate becomes 10%, for the same 4000 interest you will not be willing to shell out more than Rs.40,000 and thus the bond price will fall to 8000 as other alternative investments will give you the same interest.

Similarly, if the interest rate in the market becomes 4%, for the same 4000 rupees interest annually, you will be willing to pay Rs. 2000 for the same bond.

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Manshu March 4, 2012 at 10:06 pm

I know that much :-)

But could you explain the above situation? Is it an anomaly or is the market pricing the bond efficiently?

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Shiv Kukreja March 5, 2012 at 12:30 am

Hi Mr. Bhushan

I think it is primarily because of the fact that Retail Investors mostly apply for 15 year bonds with higher interest rates and start selling them as soon as they list and keep on doing it till the supply becomes normal.

Also, It is globally observed that 10 year bonds remain in high demand and most of the institutional investors & big investors invest in 10 year bonds. That is the reason they primarily go for 10 year bonds and not 15 year bonds. They dont apply in these bonds just for listing gains and hold on to their investments for a long term.

It also depends on the yield curve. You can check the yield curve from the below pasted link:

http://www.ccilindia.com/OMHome.aspx

Observing the Indian Yield Curve, 15 year bonds ideally should trade at a premium, but I think due to the supply exceeding the demand in case of IRFC bonds, the 15 year bonds are trading at a discount to the 10 year bonds.

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C. S. Prasad March 27, 2012 at 8:59 am

The price movement of the bond is dependent on two factors.
1. Interest Rate movement
2. Tenure of the bond.

As the market expects that the interest rate on a 15 year bond to be more than the interest rate for 10 year bond, 15 year bond will be at lower price than 10 year bond. Just to illustrate with a simple example. Assume that the market interest rate for 10 year bond was 7.9% and market interest rate for 15 year bond was 8.1% and if both of them trade at same price, then yield on both the bonds will be same. For the 15 year bond to give higher yield, the bond has to trade lower to give higher mark to market yield.

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TCB March 4, 2012 at 12:25 pm

Dear Manshu,

Can you please re-confirm that the bonds will not be issued in the form of physical certificates ? All earlier tax-free bonds had the option of getting the bonds in physical form.

Also, retail limit was upto 5 lacs for all earlier issues. Has this been reduced for all future issues starting with this ?

And, lastly, how much interest will a buyer from secondary market get ? Same as the original retail allotee or lower ?

Please reply at the earliest
Thanks

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Manshu March 4, 2012 at 9:27 pm

Those are some good questions – this issue is different from the other ones and I’m not sure why that is. They aren’t allowing NRIs to invest in these bonds either which is another difference in addition to the ones you have pointed out.

I double checked the dematerialized point and the prospectus says that the bonds will be issued in demat form first and then if people want it they can rematerialize it.

The limit is down to 0.1 million or 1 lakh in this case, not sure what will happen later on.

The secondary market owner will get a lower rate – not the same as the original allottee.

Thanks!

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Shiv Kukreja March 6, 2012 at 4:23 pm

Hi Manshu… An important notification has come. The limit for the Retail Investors has been increased to Rs. 5 lakhs from Rs. 1 lakh earlier. Kindly take a note Mr. TCB.

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Amlan Basak March 6, 2012 at 7:52 pm

Thanks Shiv.
Where are you getting all these notifications from? :)
BTW, how was the response on the first day?

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Shiv Kukreja March 6, 2012 at 9:36 pm

Hi Amlan

The notification is yet to show up on the I-T Department’s website. It is Notification No. 13, dated March 6th, 2012 and it’ll appear on the below pasted link whenever I-T dept. uploads it:

http://law.incometaxindia.gov.in/DIT/Notifications.aspx#

Official first day figures are not out yet but the Retail response has been subdued due to a poor listing of IRFC Bonds. People who took financing for the IRFC issue have given more to their financiers and brokers than their actual profits post listing. The dreams they were shown by their brokers have not materialized and they are still selling their holdings in the secondary markets.

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Manshu March 6, 2012 at 11:39 pm

When did IRFC list and did it list at a discount? I seem to have missed this. Thanks!

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Shiv Kukreja March 7, 2012 at 9:59 am

IRFC bonds got listed on friday, March 2nd and no they did not list at a discount but a very marginal premium of Rs. 10 odd. Closing price yday was Rs. 1005.08. Actually, after the success of NHAI bonds, many retail investors were made to invest in IRFC bonds via financing route. They were shown profits of Rs. 10000-15000 on listing. They paid Rs. 3000-5000 in financing for a Rs. 5 lakh application but the listing gains barely covered financing cost and brokerage. That is the reason many of them are not very keen on investing in REC bonds.

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TCB March 7, 2012 at 6:07 pm

Dear Shiv,
Do you think listing only on BSE is a negative factor for REC Bonds ? Just as PFC bonds listed only on BSE and having same coupan rate as NHAI bonds, are trading about Rs. 10-15 lower than NHAI bonds, REC bonds may also trade lower than IRFC bonds. Do you agree ? If yes, REC bonds may list at a discount, if IRFC bonds are trading around Rs. 1010 – 1015 on listing day of REC bonds. What do you think ?
Thanks

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Shiv Kukreja March 7, 2012 at 6:32 pm

Hi TCB

Yes, I think listing only on the BSE is a little bit of negative for any kind of security and it is probably contributing to the difference between NHAI & PFC as well. But, I dont think it is contributing 100% for the difference.

Honestly speaking PFC Bonds have performed quite well, in fact more than my expectations, but the differnce between NHAI & PFC is also due to the problems that currently Power sector is facing due to a possible repayment defaults by the SEBs to these Power Finance cos. like PFC, REC, PFS, IFCI etc. and also due to coal shortages.

Also, I think 8.32% for 15 years is a reasonably good rate of interest. Again, in a falling interest rate environment, I did not expect REC to fix such a good rate of interest. I expect HUDCO to list at a discount despite 8.35% interest rate but I hope REC would sail through and list at a marginal premium like IRFC has, between Rs. 1000 & Rs. 1010.

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Manshu March 8, 2012 at 5:32 am

Thanks for that info Shiv. This is a good example of why I stay away from listing gains as the same story repeated in stocks and now you see that repeating in bonds. The only way to win this listing gains game is to not play it.

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Shiv Kukreja March 8, 2012 at 5:43 pm

Hi Manshu

Wish You, Your Family & OneMint Readers a Very Happy Holi !! :-)

The words are ‘Greed’ and ‘Fear’ which retail investors always carry and sensible investment decisions after gaining required knowledge which are always missing. I knew IRFC bonds will not list at a similar price at which NHAI bonds got listed because of the interest rate differential between first allottees and second allottees. But the problem actually started when the investors were made Greedy by their Brokers for earning financing income & extra commissions.

This financing factor made “Hot Money” easily available to the retail investors and getting invested in the IRFC bonds. Because the investors have to sell on listing as these are leveraged positions, the prices do not reach their desired value levels. This is despite of a huge demand from QIBs & HNIs for IRFC bonds during the offer period.

But one thing I want to say here that the Retail Investors also do not have a choice but to do things what they are doing. Personal Finance sections of newspapers, T.V. channels, various websites, magazines etc. keep on coming up with so many articles proving that Savings Bank deposits, FDs & Post Office schemes earn negative for the investors factoring the inflation factor. So, they try to act harder to beat inflation one way or the other.

In that, if they try & succeed even once a year only, making 3-4% extra over & above 8-9% fixed income, then I think they should always look out for that. SBI Bonds have given approx. 14% returns in the last 11 months, NHAI bonds also have listed around 4% higher. But again, they should avoid ‘Greed’ & ‘Fear’, take sensible investment decisions after gaining the required knowledge and should not be guided by their brokers or agents for their investment decisions. They should consult a fee-based financial advisor who should not earn anything out of selling any of these products and be ready to shell out his/her professional fee.

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Manshu March 9, 2012 at 4:49 am

Happy holi to you and your family as well Shiv!

If people can manage gaining that extra income then that’s fine but I think they won’t be able to do that because if you invest in a string of these things for listing gains then you will ultimately end up making losses and it will wipe out earlier gains. Also, by not speculating like this you free up money that can go to work for you for longer durations and at a higher yield instead of looking for one hit gains.

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Shiv Kukreja March 9, 2012 at 11:29 am

Hi Manshu

That is what I want to say here. Retail Investors should not be a part of this herd. They should not speculate in a string of these issues rather should be very selective and make sensible investment decisions after gaining required knowledge. I did not make my clients invest a single rupee in Muthoot Bonds, IIISL Bonds or Manappuram Bonds. My clients suffered just a little bit in IFCI Bonds but that is due to lack of liquidity.

Money invested in some good issues like SBI Bonds or NHAI Bonds or Coal India IPO or MCX IPO are actually working for longer durations, giving listing gains and yielding high as well. So, the need of the hour is to make selected sensible investment decisions.

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Amlan Basak March 9, 2012 at 12:04 pm

Shiv, I am just curious to know why you didn’t let your clients invest in Muthoot bonds….
Also, please let me know how I can invest in SBI Bonds.

Manshu March 10, 2012 at 6:42 am

I’m all for investing money in good companies that you want to hold on for a few years – that makes sense to me.

raja March 8, 2012 at 1:40 pm

should one repay the housing loan or invest in REC bonds?
Housing loan rate 12%. Assume that he can claim loss from house property
Thanks,
Raja

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Manshu March 9, 2012 at 4:51 am

I think this will depend from one individual to another and also how much longer you have to pay off the loan, is your component more principal right now or more interest.

I have a detailed post on this with plenty of great comments that will be of interest to you.

http://www.onemint.com/2012/01/10/pay-off-house-loan-or-invest/

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Shiv Kukreja March 7, 2012 at 10:01 am
Shiv Kukreja March 9, 2012 at 12:24 pm

Hi Amlan… I did not stop them to invest in Muthoot Bonds but recommended not to go for it as I think the business model is too concentrated to give me the required confidence in it. Also, I want to check one bear phase in Gold Price Cycle to check the sustainability of this business model. I have a view that the gold prices have risen too soon too fast in he last 3-5 years and there is a bubble forming here.

You can invest in SBI Bonds from the secondary markets like you buy shares.

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Shraddha March 6, 2012 at 8:53 pm

sir,

do i need to have share trading account also or demat account is enough?

thanks,
Shraddha

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Manshu March 7, 2012 at 6:15 am

I believe you can buy them using the Demat account but I think you won’t be able to sell them without a trading account or without the assistance of a broker. In this case, I think you’re better off investing in them and then rematerializing it.

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Sanjay Goel March 6, 2012 at 9:05 pm

Hi Manshu,
I don’t understand demat very well. I have been comparing this plan with FD. The rate of interest etc are good but I am unsure how to sell the bond incase I need the money?
I understand that it can be sold via the demat account, but it is easy enough to sell? And is there a chance of incurring losses if I have to sell it in an emergency?

Thanks
Sanjay

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Manshu March 7, 2012 at 6:14 am

Hi Sanjay,

You will have to open a trading and demat account and after that it is fairly easy to buy and sell but yeah the risk of incurring loss does exist. This will happen if future issues of similar nature come out at a higher rate of interest than this one and as a result these bonds start selling at a discount.

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EJAZ HUSAIN March 7, 2012 at 4:15 pm

Dear All Sirs,
I want to invest RS.100000/- in REC tax free bond for 15 years.How much money will be yeilded after 15 years of investment.Pl guide me.
Ejaz Husain

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Manshu March 8, 2012 at 5:26 am

You will get interest every year and at the end of the 15 years the 1 lakh will be repaid back to you.

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EJAZ HUSAIN March 8, 2012 at 10:05 am

Thanx Sir

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shashwat March 9, 2012 at 12:08 am

IRFC and HUDCO bonds had the step down clause i.e. if any one buys the bond in secondary market he would get the interest rate meant for institutional investor instead of that meant for retail investor. This is the primary reason why IRFC has listed at marginal premium as compared to NHAI which didn’t had any such clause. Do you know if there is such clause in REC bonds.

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Manshu March 9, 2012 at 4:33 am

Yes, there the step down clause exists in REC as well.

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Chetan Sachdev March 9, 2012 at 12:10 am

// the amount you invest in those bonds get reduced from your taxable income but in these bonds that’s not going to be the case.
Does this mean that there is no tax saving of INR 20,000/- ?

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Manshu March 9, 2012 at 4:31 am

I think you’re referring to 80CCF which allows you to deduct 20,000 from taxable income so the tax saving is actually 30, 20 or 10% of that.

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Chetan Sachdev March 9, 2012 at 1:07 pm

Yes.. I am referring to 80CCF. Is it applicable on this bond ?

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Manshu March 10, 2012 at 6:41 am

No, it is not.

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raja March 9, 2012 at 3:06 pm

won’t it be a profitable proposition if we invest 5 lacs in REC bonds and earn about 2% after brokerage and tax? The question is: will this give 3% in near term? say in one month.

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Shiv Kukreja March 9, 2012 at 7:51 pm

Hi Mr. Raja… Going by the trend it is highly unlikely.. IRFC bonds today went below Rs. 1000. So there is no reason for REC bonds to list at a 3% premium until & unless there is a steep interest rate fall in the next one month.

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TCB March 9, 2012 at 10:46 pm

Dear Shiv,
How much do you think would be the effect of 0.75% CRR cut announced by RBI on 9/3/12, on the listing of REC bonds ?
Any idea about the retail subscription till today (9/3/12) ?
Thanks

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Shiv Kukreja March 10, 2012 at 9:48 am

Hi TCB

It is definitely going to help all these bonds but not to a great extent as sooner or later it had to happen and it is already into the prices. Moreover, the bigger worries are arising from the crude price hike which has gone up from $90 odd levels to $105 levels. It has resulted in a possible fresh round of Petrol price hike in India. I expect REC bonds to list between Rs. 1000 & Rs. 1020 now.

Subscription figures are available till March 8th and it was Rs. 209 Crores against Rs. 750 Crores in the Retail Investors category.

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raja March 9, 2012 at 3:07 pm

I meant by selling the bonds in secondary market

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saharanpuri March 9, 2012 at 10:39 pm

How much impact is the lower interest rate of 0.2 % due to step down clause ?

Could it be as high as 40 rs i.e the difference between the average NHAI & IRFC listing rate?

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Manshu March 10, 2012 at 6:35 am

I couldn’t say that.

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saharanpuri March 11, 2012 at 1:52 pm

I have applied 4 applications in REC bonds from my OD A/c @ 13.5% u today at 1 pm so that cheque is presented on Tuesday with following view
1) See the rate of IRFC & other bonds post CRR cut.
2) Last issuance of tax free bonds at high rate.
3) Already healthy collections of 400 crores in retail category.
4) Comparatively small issue size of 3000 crores
5) Equivalent FD rates of 12 % fixed for 15 years.
6) Listing expected in April coinciding with rate cut to be anounced by RBI on April 15.
7) Incentive of 0.9 % & interest till allotment

I think the issue may still remain open till mOnday.

Views invited on the above as cheque will hit only on Tuesday( Shud I let the cheques issed from OD a/c pass),current GMP, interest rate scenario .

Why 15 year IRFC bond is at par while 10 year one @ 1017-18 & any differentail between IRFC & REC.

rec bonds closing tomorrow what to do finally shall i let the cheques paass?

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Manshu March 11, 2012 at 5:40 pm

All the best man – far too many ifs for my taste but then I’m no expert in these games.

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Ajay March 11, 2012 at 7:15 pm

Will two applications from a single investor be accepted for REC issue like it was in earlier isssues? Not able to search this on prospectus, anyone have any clue?

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Amlan Basak March 13, 2012 at 8:12 am

What is the final statistics of the overall subscription?
Any idea on tentative allotment date?

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Shiv Kukreja March 13, 2012 at 11:13 am

Hi Amlan

The issue is subscribed 1.583 times overall and the Retail portion is subscribed 0.77 times, Rs. 581 Crores against Rs. 750 Crores reserved. Allotment and listing expected to happen in the first week of April.

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Amlan Basak March 13, 2012 at 12:12 pm

Thanks Shiv for your prompt response. It ensures I will get my full allotment.
BTW I am waiting for the allotment and not the listing… :)

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Shiv Kukreja March 13, 2012 at 12:17 pm

That was my proactive response.. :-)

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shafin rupani March 20, 2012 at 5:20 pm

Dear Sir,

I had applied in REC bond macrh 2012 but HUDCO is listed 55 rs minus against issue price of 1000. So can i withdraw my REC BOND application ? or wait for allotment and listing.

Because bond market premium is going down and it will result in REC listing below issue price.

Please reply me as soon as possible.

Shafin Rupani

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aswath March 22, 2012 at 9:39 pm

HUDCO retail tax free bonds are available at Rs 960 per bond in secondary market against the face value of Rs 1000. It makes sense to buy them if one is in 30% tax bracket right?? Why should we subscribe to new issues at Rs 1000 when comparable products are available at a discounted value?

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Manshu March 24, 2012 at 11:31 pm

Yes, I would agree with that train of thought.

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Bhaskar April 1, 2012 at 12:40 am

Hi Shiv,

Any idea when the listing will happen. Its already allotted. Thx.

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Shiv Kukreja April 3, 2012 at 1:50 pm

Hi Mr. Bhaskar

REC Tax Free Bonds will list on the BSE on Wednesday, April 4th.

Source:

http://www.bseindia.com/cirbrief/new_notice_detail.asp?noticeid={ED657E16-C67A-48B1-90AF-F486B3FFDD62}&noticeno=20120403-6&dt=4/3/2012&icount=6&totcount=7&flag=0

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Bhaskar April 3, 2012 at 5:30 pm

Many thanks.

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Shiv Kukreja April 4, 2012 at 10:13 am

Hi

REC Tax Free Bonds listing has happened on BSE today. Bonds listed at Rs. 984 against the Face Value of Rs. 1000, touched a high of Rs. 988.80, a low of Rs. 960.15 and currently trading at Rs. 975. One more poor listing in the series of Tax Free Bond issues. It is again going to hit investors’ sentiment in a negative manner.

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Manshu April 4, 2012 at 4:17 pm

Wow Shiv – looks like this party is over, but I guess with the beginning of the new financial year – they wouldn’t issue any more tax free bonds for a few months, right?

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Shiv Kukreja April 4, 2012 at 4:48 pm

Hi Manshu… In fact, I think this is one of the best times to issue these Tax Free Bonds again. When these tax free bonds were coming in the months of January & February, interest rates went down to the levels of 8.15% to 8.30% after touching 9%. Throughout March & in the first couple of days of April, Bond yields have hardened again to the levels of 8.70%+. If I was required to raise money through these kind of bonds, I would have definitely done that within next 10-15 days.

The problem behind listing at a discount lies somewhere between demand & supply for these bonds. On a listing day, there is no demand but supply is huge. Also, due to hardening of yields, bond prices come down naturally. Investors should buy these bonds from the secondary markets now with a medium to long term perspective.

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Manshu April 4, 2012 at 6:16 pm

It will be interesting to see if anyone else issues them, I would doubt that give the current scenario but at the same time I think investors have some pretty good options when it comes to investing in them through the secondary market.

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Pune Guy May 26, 2012 at 11:40 am

How do you buy these on the secondary market ? Infact, I can’t even figure out where to go looking for a quote on, say, icicidirect.com.

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Shiv Kukreja May 29, 2012 at 9:58 am

You can buy these bonds online through icicidirect.com or some other stock broker either online or offline.

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Amlan Basak May 29, 2012 at 10:05 am

Shiv,
Any other new issues of TFBs in pipeline?

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Shiv Kukreja May 29, 2012 at 1:53 pm

Hi Amlan… There are no such announcements by these cos. as of now. IIFCL was planning to come out with Tax Free Bonds before June (by May-end) but dont know what happened to their plans.

Source: http://www.thehindu.com/business/article3353212.ece

NHAI will come up with such an issue in the 3rd quarter.

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Shiv Kukreja May 29, 2012 at 9:49 am

Hi Pune Guy… You can check the quotes of these Bonds/NCDs listed on the NSE with this link:

http://www.nseindia.com/live_market/dynaContent/live_watch/equities_stock_watch.htm?cat=SEC

Here is the link specifically for REC Tax Free Bonds:

http://www.bseindia.com/bseplus/StockReach/StockQuote/Equity/821REC27/812REC27/961744/COMPANY

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rajiv June 8, 2012 at 4:46 pm

when is first interest due on REC TFBs. what would be the record date

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Shiv Kukreja June 9, 2012 at 12:16 am

Every year July 1st is the Interest Payment Date for REC Tax Free Bonds. So, July 1st, 2012 being a Sunday, you’ll get the interest on July 2nd this year. Record Date is 15 days prior to the relevant Interest Payment Date.

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thiagarajan m June 25, 2012 at 6:22 pm

pl let me know whether these bonds can be assigned to banks and loan can be availed… its urgent…. pl reply

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Shiv Kukreja June 25, 2012 at 8:24 pm

Yes, these bonds can be pledged or hypothecated for obtaining loans.

Source: REC Tax Free Bonds prospectus.

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sonal June 28, 2012 at 8:59 pm

can i purchase these bonds now..are these bonds are available for purchasing , please tell me ,its urgent for me…

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Shiv Kukreja June 29, 2012 at 5:20 pm

Yes, you can buy these bonds from the secondary markets. These bonds are listed on the BSE and Rs. 1028.37 was today’s closing price.

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Bhaskar July 4, 2012 at 8:22 am

I see a ECS credit of Rs 761/- on 3rd July for REC bonds. But I had bought 25 bonds during the initial offering (i.e with interest of 8.32%) and then purchased additional 10 bonds from the market. Did everyone receive the correct interest from REC? Thanks.

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Bhaskar July 4, 2012 at 2:13 pm

Anybody else who received the interest?? Whom do we contact to sort this out. Please help!!

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Shiv Kukreja July 4, 2012 at 10:22 pm

Hi Bhaskar… I did not invest in the REC Tax Free Bonds issue otherwise I would have shared my experience here. But, in this case, you can calculate the interest yourself.

On 25 Bonds – Rs. 25000 * 96/365 days (From the Deemed Date of Allotment March 27th till June 30th) * 8.32% = Rs. 547 approx.
On 10 Bonds – Rs. 10000 * No. of days from the date of investment till June 30th * 8.12%

I hope you get close to the figure of Rs. 761.

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Bhaskar July 4, 2012 at 11:46 pm

Many many thanks Shiv. Your calculation is perfect.
I was unduly worried.

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Shiv Kukreja July 5, 2012 at 4:56 pm

You are welcome Bhaskar!

I could help you, that is one good Karma… :-)

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P.D.Bajoria October 11, 2012 at 11:28 am

Kindly inform me as to when can i expect to receive 1st interest payment from REC

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Shiv Kukreja October 12, 2012 at 10:04 am

1st interest payment has already been made on July 1st, 2012. Please check your bank account. Now, the 2nd interest payment will be made on July 1st 2013.

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Rajeev January 3, 2013 at 2:56 pm

I have not received the interest for REC infrastructure bonds. Bonds where allotted on 28Feb 2012 in demat format. Kindly let me know where I can raise this issue.
Thanks in advance.

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Shiv Kukreja January 3, 2013 at 6:39 pm

Hi Rajeev… You should contact the Registrar for the same, the details of which must be there on the allotment advice.

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ajay August 22, 2013 at 6:52 pm

any idea what is record date for interest in REC BOND 7.04% PA Tax Free S2 (RECLTD-N2.NS) in year 2013

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Shiv Kukreja August 22, 2013 at 8:35 pm

Hi Ajay,

Interest payment date for REC tax-free bonds issued last year is December 1st. So, I think the record date should be 15 days prior to that.
http://www.onemint.com/2013/07/04/interest-payment-dates-of-tax-free-bonds-issued-during-fy-2011-12-2012-13/

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ajay August 22, 2013 at 8:45 pm

hi Shiv
What you recommended for REC 7.04 % bond RECLTD-N2.NS , current rate is 1003
better to sale or hold i see Bond down by 5-6% in last 1 month
Ajay

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Shiv Kukreja August 22, 2013 at 11:38 pm

Tax-free bonds to be issued this financial year would carry higher interest rate than the bonds issued last year. REC 7.04% bond’s current YTM is 7.9747%. Looking at the current interest rate scenario and if any AAA rated issue comes in the next 20-30 days, I think one should switch his/her existing investment to the new one. I think your existing REC bonds should give you a better price than Rs. 1003 in the next few days.

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USHA March 7, 2014 at 12:49 am

TO SIR CAN U PLS TELL ME HOW BECOME THE BROKER FOR THESE BONDS..
I MEAN THE ELEGIBLITY
the amount of comm
whether TDS will be deducted on that sum

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