HUDCO 8.76% Tax Free Bonds Issue – September 2013

by Shiv Kukreja on September 14, 2013

in Investments

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

After a reasonably good response to the REC tax-free bonds, the next eligible company to come up with such an issue is Housing and Urban Development Corporation Limited (HUDCO). The company will be launching its issue from the coming Tuesday, September 17.

The rates the company is going to offer in this issue are higher than the rates offered by REC in its issue, which is still open and getting closed on September 16. There are two reasons for it, firstly, HUDCO issue is ‘AA+’ rated and that is why it can offer rates 10 basis points (or 0.10%) higher than any ‘AAA’ rated issuer. Secondly, the average G-Sec rates have been ranging higher in the past 10-20 days than they were earlier when REC came up with its issue.

As compared to REC’s 8.26% (10Y), 8.71% (15Y) and 8.62% (20Y), HUDCO is offering 8.39%, 8.76% and 8.74% rate of interest for the respective tenors.

Though the interest will be paid annually, I do not know the interest payment date as yet, as the final prospectus filed on September 11 is still not available on SEBI’s website, on BSE’s website, on HUDCO’s website and not even on any of the lead managers’ websites. It is quite disappointing for me not to have the prospectus available for public reference even three days prior to the issue opening date.

HUDCO is allowed to raise Rs. 5,000 crore from tax-free bonds this financial year, out of which it has already raised Rs. 190.80 crore through private placement. So, now it plans to raise the remaining Rs. 4,809.20 crore through this public issue, including the green-shoe option of Rs. 4,059.20 crore. The base issue size is Rs. 750 crore.

The official closing date of the issue is October 14 and the company may extend or preclose the issue, depending on the investors’ response to the issue.

There are many things which are common in this issue and the REC issue, so I will quickly state those features which are different in this issue.

Rating of the issue - CARE and India Ratings have assigned a rating of ‘AA+’ to this issue, which is also ‘Secured’ in nature. HUDCO is wholly-owned by the government of India, so the investors’ investment is quite safe.

Listing - HUDCO will get these bonds listed only on the Bombay Stock Exchange (BSE). The allotment and the listing will happen within 12 working days from the closing date of the issue. Investors can apply for these bonds either in physical form or in demat form, as per their comfort and requirement.

Interest on Application Money & Refund - The investors will get interest on their application money also, from the date of investment till the deemed date of allotment, at the same rate of interest as the applicable coupon rate is. Unlike REC issue which is to pay 5% p.a. interest on the refund money, HUDCO will pay the applicable coupon rate.

Categories of Investors & Basis of Allotment - The investors again have been classified in the following four categories and each category will have certain percentage of the issue reserved for the allotment:

Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue is reserved

Category II – Non-Institutional Investors (NIIs) – 20% of the issue is reserved

Category III – High Net Worth Individuals including HUFs, NRIs & QFIs – 30% of the issue is reserved

Category IV – Resident Indian Individuals including HUFs, NRIs & QFIs – 40% of the issue is reserved

QIBs portion had 20% of the issue reserved in the REC issue and after observing their response in that issue, their reserved portion has been reduced to 10% in this issue. Category III HNI investors will get this 10% share of the pie. NRIs are eligible to invest in this issue as well, on a repatriation basis as well as on non-repatriation basis. Qualified Foreign Investors (QFIs) are also eligible.

Minimum & Maximum Investment - There is no change in the minimum investment requirement of Rs. 5,000 i.e. at least 5 bonds of Rs. 1,000 face value each. Retail Investors’ investment limit stands at Rs. 10 lakhs, beyond which they will be considered as HNIs and will get a lower rate of interest.

Interest rates of this issue look very attractive to me. Earlier I used to say that the investors in the 30% or 20% tax bracket should consider these bonds, but now I advise investors even in the 10% tax bracket to go for these bonds. Though not strictly comparable, these bonds are attractive even against IIFL NCDs or Muthoot NCDs.

I think the way Indian rupee and the stock markets have recovered in the past 10 days or so, the G-Sec yields should also start falling soon. Going forward, I think the rates should not be higher than these HUDCO bonds, unless US Fed Reserve has something very dramatic in store for us in its meeting on September 17-18.

Link to Download the Application Form of HUDCO Tax-Free Bonds

If you need any further info or you want to invest in these bonds, you can contact me at +919811797407

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{ 197 comments… read them below or add one }

Shiv Kukreja October 1, 2013 at 8:19 pm

Day 11 (October 1st) subscription figures:

Category I – Rs. 125.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 270.30 crore as against Rs. 961.84 crore reserved
Category III – Rs. 494.97 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 995.31 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 1,886.08 crore as against total issue size of Rs. 4,809.20 crore

Reply

Anurag Shandilya October 2, 2013 at 11:33 am

Seems to remain under-subsrcribed.

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Shiv Kukreja October 2, 2013 at 1:25 pm

Yes, it looks like it would fall short of its total issue size. I think HUDCO should extend the closing date of the issue.

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Shashwat October 1, 2013 at 11:10 pm

Hudco bond subscription might slow down further as IIFCL is having better credit rating. Hudco bonds might list at a discount considering REC bond listing at par.

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Shiv Kukreja October 2, 2013 at 1:23 pm

It has already slowed down, only retail investors & HNIs are investing due to higher rates for 10 year & 15 year options.

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Paresh Patel October 2, 2013 at 1:16 am

I would like to know what is the last date for IIFCL Tax Free Bond to apply.

Which one is good ? HUDCO or IIFCL ?

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Shiv Kukreja October 2, 2013 at 1:37 pm

Hi Paresh,

IIFCL bonds issue will close on October 31st. Here is the link to check more details about it:
http://www.onemint.com/2013/10/01/iifcl-8-75-tax-free-bonds-october-2013-tranche-i-issue/

Rating wise IIFCL is better at ‘AAA’. Interest rate of IIFCL for the 20 year option is higher at 8.75%, but lower for the 10 year & 15 year option. Personally, I prefer subscribing for IIFCL 20 year bonds and taking it in the demat form.

Reply

Paresh Patel October 2, 2013 at 7:42 pm

Hi Shiv

Thanks for response

Reply

Shiv Kukreja October 3, 2013 at 11:40 am

You are welcome Paresh!

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Paresh Patel October 3, 2013 at 2:24 am

Hi Shiv

I have a A. O. P. status [ Association of Person - Family Trust - Taxed from the first rupee income ] for Income Tax purpose . So I would like to know if I would like to invest in this Family Trust – A O P for 20 Years in IIFCL T ax Free Bonds, which catagory applied to me
Retail Investor : 20 Years / 8.75 % OR Other Investor : 20 Years / 8.50 %.

By Income Tax view I am paying income Tax at the highest rate [ 30 % ] from my first One rupee earning.

Reply

Shiv Kukreja October 3, 2013 at 11:51 am

Hi Paresh,

An Association of Persons (AOP) – Family Trust would fall in Category II of the eligible investors and would be eligible for 8.50% p.a. IIFCL 20 year option. I think it is better to do it by creating an HUF rather than AOP, if possible.

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Shiv Kukreja October 3, 2013 at 6:01 pm

Day 12 (October 3rd) subscription figures:

Category I – Rs. 125.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 272.59 crore as against Rs. 961.84 crore reserved
Category III – Rs. 505.01 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1039.99 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 1,943.09 crore as against total issue size of Rs. 4,809.20 crore

Reply

Shiv Kukreja October 4, 2013 at 11:50 pm

Day 13 (October 4th) subscription figures:

Category I – Rs. 125.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 276.80 crore as against Rs. 961.84 crore reserved
Category III – Rs. 519.84 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1081.33 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,003.46 crore as against total issue size of Rs. 4,809.20 crore

Reply

pradeep October 5, 2013 at 11:30 am

Sir,

What is the status of PFC bond issue?

Reply

Shiv Kukreja October 5, 2013 at 1:01 pm

No info as yet.

Reply

Shiv Kukreja October 7, 2013 at 7:11 pm

RBI has today cut MSF Rate by 50 basis points (or 0.50%) to 9%, in order to cut liquidity crunch in the banking system. This is going to help banks in reducing their cost of overnight (very short-term) borrowings and also in normalization of the yield curve. Bond markets should cheer this news to some extent tomorrow.

Reply

Shiv Kukreja October 8, 2013 at 6:01 pm

Day 14 (October 7th) subscription figures:

Category I – Rs. 125.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 279.24 crore as against Rs. 961.84 crore reserved
Category III – Rs. 535.12 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1133.73 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,073.59 crore as against total issue size of Rs. 4,809.20 crore

Reply

Shiv Kukreja October 8, 2013 at 6:03 pm

Day 15 (October 8th) subscription figures:

Category I – Rs. 125.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 315.74 crore as against Rs. 961.84 crore reserved
Category III – Rs. 546.04 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1168.12 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,155.40 crore as against total issue size of Rs. 4,809.20 crore

Reply

aryan amin October 8, 2013 at 8:27 pm

pls send me daily subscription figures of IIFCL tax free bonds like HUDCO bonds…
Thanks for great information with daily updates…

Reply

Shiv Kukreja October 8, 2013 at 8:46 pm

Hi Aryan,

You may leave a comment on the IIFCL post and you’ll get the required info.

Reply

akhilesh October 8, 2013 at 8:36 pm

Dear Shiv,
Can we expect better interest rates in NHPC and PFC issues.

Reply

Shiv Kukreja October 8, 2013 at 8:44 pm

Dear Akhilesh,

PFC issue should hit the markets before NHPC issue and as per my observation, its rates should be higher by around 10-20 basis points than the IIFCL rates.

Reply

Shiv Kukreja October 9, 2013 at 11:11 am

PFC Tax-Free Bonds Issue opens on October 14th. Coupon Rates are as under:
8.92% for 20 Years
8.79% for 15 Years
8.43% for 10 Years

Reply

Jitendra October 9, 2013 at 4:54 pm

Hi Shiv – Many Thanks for the update. When can we expect your analaysis / recommendation on the PFC issue?

Reply

Shiv Kukreja October 9, 2013 at 5:58 pm

Hi Jitendra,

I am working on that only. I hope to post it by late evening today.

Reply

Shiv Kukreja October 10, 2013 at 12:57 am
Shiv Kukreja October 9, 2013 at 6:00 pm

Day 16 (October 9th) subscription figures:

Category I – Rs. 125.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 320.66 crore as against Rs. 961.84 crore reserved
Category III – Rs. 555.98 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1199.47 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,201.61 crore as against total issue size of Rs. 4,809.20 crore

Reply

Shiv Kukreja October 10, 2013 at 11:56 pm

Day 17 (October 10th) subscription figures:

Category I – Rs. 135.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 323.41 crore as against Rs. 961.84 crore reserved
Category III – Rs. 565.63 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1230.55 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,255.09 crore as against total issue size of Rs. 4,809.20 crore

Reply

Shiv Kukreja October 11, 2013 at 5:47 pm

Day 18 (October 11th) subscription figures:

Category I – Rs. 135.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 324.76 crore as against Rs. 961.84 crore reserved
Category III – Rs. 575.32 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1258.89 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,294.47 crore as against total issue size of Rs. 4,809.20 crore

Reply

Shiv Kukreja October 12, 2013 at 1:44 pm

NHPC tax-free bond issue opens on October 18th. Coupon Rates are as under:

8.92% for 20 Years
8.79% for 15 Years
8.43% for 10 Years

The rates offered are absolutely same as the PFC rates. It is also rated ‘AAA’. The issue closes on the same date i.e. November 11th.

Reply

Paresh Patel October 13, 2013 at 10:23 pm

I would like to know which one good to invest ?

PFC OR NHPC ?

Reply

Sachdeva October 14, 2013 at 12:52 pm

I have decided to split my investment in both of them. Rates for the tenure are same and both being PSU companies I don’t see much risk in either of them.

Reply

Srikrishnan October 14, 2013 at 11:42 am

I would like to know the interest payment dates of HUDCo bonds.

Reply

Shiv Kukreja October 14, 2013 at 6:08 pm

Hi Srikrishnan,

Interest Payment Date of HUDCO bonds is yet to be announced. First payment will be made after one year from the deemed date of allotment. I think it should fall between October 21st and October 31st.

Reply

Shiv Kukreja October 14, 2013 at 6:20 pm

Day 19 (October 14th) subscription figures:

Category I – Rs. 190.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 328.93 crore as against Rs. 961.84 crore reserved
Category III – Rs. 582.53 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1304.03 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,405.99 crore as against total issue size of Rs. 4,809.20 crore

Issue has got 50% subscribed to the total issue size on the last day.

Reply

cvs77 October 17, 2013 at 6:03 pm

Hi Shiv,

Thanks a lot for making this site a one-stop shop for all the investment related information – up-to-date on daily basis. Your frequent updates on each of the topics simplify the investors’ life…

As per your post HUDCO has got only 50% subscribed to the total issue size on the last day. In this scenario, is the issue closed or the company has extended the closure date?

Is it possible that HUDCO may come back with next tranch during the same Financial Year so to try and collect some more money, as the govt. approved limits/targets are still not achieved? If so, the ROI could be higher/lower depending on the prevailing market conditions at the time of issue, right?

Regards, cvs77

regards,
Chintan

Reply

Shiv Kukreja October 17, 2013 at 6:13 pm

Thanks a lot Chintan!

HUDCO issue has closed with 50% subscription and the rest 50% it may or may not raise from the public issue(s). It is totally HUDCO’s discretion.

Yes, the ROI could be higher/lower depending on the prevailing market G-Sec yields at the time of issue.

Reply

aryan amin October 15, 2013 at 12:48 pm

pls give your opinion about IIFCL/PFC & NHPC Tax Free Bonds along with their link so as to check monitor them on daily basis..( For subscription knowledge..)
how can we check them separately from the new tab each time ?
thanks for providing wonderful insight of the all the bonds…

Reply

Shiv Kukreja October 15, 2013 at 6:49 pm

Thanks Aryan for your kind words!

Here you have the links of IIFCL, PFC & NHPC issues:
http://www.onemint.com/2013/10/01/iifcl-8-75-tax-free-bonds-october-2013-tranche-i-issue/
http://www.onemint.com/2013/10/10/pfc-8-92-tax-free-bonds-october-2013-issue/
http://www.onemint.com/2013/10/14/nhpc-8-92-tax-free-bonds-october-2013-issue/

You can check my opinions about these issues at the end of these posts. Plz let me know if you have any specific query about any of the points.

Reply

Paresh Patel October 17, 2013 at 10:11 pm

Can you tell us when HUDCO – 8.76 % Tax Free Bond Allotment is.

Reply

Shiv Kukreja October 17, 2013 at 11:37 pm

It is not announced as yet. You can expect it to happen between 7-10 working days from the issue closing date.

Reply

pradeep October 24, 2013 at 8:03 am

when is the allotment?”

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Shiv Kukreja October 24, 2013 at 10:22 am

It should start happening any day now.

Reply

Paresh Patel October 24, 2013 at 8:27 am

Do you think HUDCO Tax Free Bonds allotment will come before Diwali ?

Reply

Shiv Kukreja October 24, 2013 at 10:23 am

Definitely before Diwali.

Reply

Raju October 25, 2013 at 4:27 pm

Any idea when the Hudco Bonds will be allotted / listed?

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Shiv Kukreja October 25, 2013 at 5:56 pm

Most likely early next week.

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pradeep October 25, 2013 at 10:02 pm

The bonds have been credited to my demat a/c.

Reply

Shiv Kukreja October 25, 2013 at 11:33 pm

oh that’s great !!

Reply

Ramadas October 26, 2013 at 7:11 am

Hi Shiv

This is the first site i check now for any tax free bonds related news and you have done a fantastic job in putting this blog together

I had applied for HUDCO tax free bonds using 2 applications. I now see that bonds applied through first application form is alloted and credited in my demat account. Cheque given for my second application is already encashed and i dont see any bond allotment for the same.

What is the process for getting the bonds for second application ?
Will the broker be able to fix this issue?
Will i get bonds or HUDCO will refund my money?

Thanks in advance for your response.

Regards
Ramadas

Reply

Shiv Kukreja October 26, 2013 at 10:51 am

Hi Ramadas,

If their is no technical error in your second application, then I don’t see any reason for HUDCO to not allot any bonds against it. Just wait for a day or two and I think you’ll definitely get to know the exact status of your second application.

Reply

Raju October 28, 2013 at 11:53 am

Hi Shiv,
Though I applied through online route, it seems my application is rejected. How can there be any defect when it is applied online? Whom should I contact about this (ie my broker / Hudco directly)?
Regards,

Reply

Shiv Kukreja October 28, 2013 at 12:08 pm

Hi Raju,

Just wait for one more day and if you still don’t get it, then you should check it with your broker or the Registrar of HUDCO i.e. Karvy Computershare.

Reply

Raju October 28, 2013 at 2:12 pm

Thanks for quick reply. I already got the refund, so checked with my broker and he promised to get back soon.

Now the next question. When is this issue expected to get listed?
Regards,

Reply

Shiv Kukreja October 28, 2013 at 2:21 pm

Listing date is not announced as yet, but I expect the bonds to get listed on Wednesday.

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Shiv Kukreja October 28, 2013 at 6:35 pm

HUDCO tax-free bonds to get listed on the BSE on October 29th i.e. Tuesday.

Here are the BSE codes for the same:

8.39% 10-year bonds – BSE Code – 961784
8.76% 15-year bonds – BSE Code – 961785
8.74% 20-year bonds – BSE Code – 961786

Reply

Shiv Kukreja October 28, 2013 at 6:40 pm

Deemed date of allotment has been fixed as October 25, 2013. Interest will be paid on October 25th every year.

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ANANDATEERTHA JOSHI October 28, 2013 at 7:24 pm

I had applied for hudco tax free bonds on 5 Oct 2013. I had applied for the bonds in physical format. When I am likely to get the bonds alloted/actual bonds.

I am following your site regularly to know the developments in bonds market.

thanks a lot

Reply

Shiv Kukreja October 28, 2013 at 11:06 pm

Hi,

Normally a company issues allotment letters first and then sends bond certificates to the investors in about 2 months time. I think by now you should have got the allotment letter from the company against your investment. You should wait for a few days more and I hope you’ll get both the allotment letter and the bond certificate. If you don’t want to wait for the allotment letter for confirmation of bond allotment, you can contact the Registrar for the same.

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Ashok October 29, 2013 at 12:09 pm

With today’s repo rate hike of 0.25%, is it expected to have newer Tax Free bonds with higher coupon rate?

Ashok

Reply

Shiv Kukreja October 29, 2013 at 1:49 pm

Hi,

As I had mentioned earlier also, 0.25% hike in Repo Rate & 0.25% cut in MSF Rate was already factored in by the markets. We know by now that Coupon Rates of Tax-Free Bonds are linked to the benchmark G-Sec rates. After the policy actions by the RBI, G-Sec rates have fallen slightly. So, as of now, I don’t think that the coupon rates will be higher with the upcoming tax-free bonds. Inflation, fiscal deficit, Policy actions, industrial production, oil prices, QE tapering etc. will be the key factors on which the interest rate movement will depend.

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Shiv Kukreja October 29, 2013 at 3:41 pm

HUDCO bonds got listed today on the BSE. 8.76% 15-year bonds hit a high of Rs. 1,000, low of Rs. 999.75 and closed at Rs. 999.75. Total bonds traded on the BSE were 3,884.

Reply

Raman Verma January 21, 2014 at 9:57 am

I would like to invest in interest tax free bond
which is the best bond for safe investment and
best rate of interest and must be in demat a/c

Reply

Shiv Kukreja January 21, 2014 at 9:31 pm

Hi Mr. Raman,

At present, only two tax-free bond issues are available for subscription – NHAI and IRFC. You can have both these bonds in your demat account. Here are the links for comparison purposes:

http://www.onemint.com/2014/01/12/nhai-tax-free-bonds-january-2014/
http://www.onemint.com/2013/12/28/irfc-tax-free-bonds-8-65-january-2014-issue/
http://www.onemint.com/2014/01/15/nhais-8-75-or-8-52-vs-irfcs-8-65-or-8-48-which-issue-is-better/

Reply

F.Rodrigues January 24, 2014 at 4:41 pm

Shiv Kukreja, Sir, I have recvd Hudco allotment letter and interest refund letter in Oct, but I have not yet received the ‘letter of Intimation’ as per stated in the allotment letter.(Upon receipt of this said letter I have to send the’ letter of allotment’ duly signed to Karvy, who will then send me my bond certificates.Pl nform if this letter of intent has been recvd by others.
Thanks.
Francis.

Reply

Shiv Kukreja January 24, 2014 at 6:58 pm

Hi Rodrigues,

Yes, you’ll have to send this letter back to Karvy Computershare in order to receive your Bond Certificate. I think it is applicable for only certain issues.

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P.N.Palekar February 24, 2014 at 1:29 pm

Ihave received the allotment letter for the HUDCO bonds issued in October 2013. I have not received the Certificate as yet. Whom should I contact

Regards
Palekar

Reply

Shiv Kukreja February 24, 2014 at 4:55 pm

You need to contact Karvy Computershare, the Registrar for HUDCO bonds – http://mis.karvycomputershare.com/ipo/

Reply

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