IRFC Tax Free Bonds @ 8.65% – January 2014 Issue

by Shiv Kukreja on December 28, 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

As National Housing Bank (NHB) tax-free bonds issue is about to get launched from Monday, Indian Railways Finance Corporation (IRFC) would also be coming out with its issue from January 6. Like many of the investors, I am also disappointed with the coupon rates IRFC has announced to offer and also with its decision not to offer the 20-year option.

If any of you doesn’t know already, IRFC has decided to offer 8.48% per annum for the 10-year option and 8.65% per annum for the 15-year option. These rates are lower than the rates NHB issue will carry i.e. 8.51% p.a. for 10 years and 8.88% p.a. for 15 years. As both these issues are ‘AAA’ rated and both companies are government organisations, I think people would be more enthusiastic about NHB bonds.

Though at one place in the prospectus the closing date has been mentioned as February 20, 2014, it has been stated as January 20, 2014 at all other places. Looking at the illustrative example it gets clear that it is indeed January 20th.

Size of the Issue – IRFC is authorised to issue tax free bonds worth Rs. 10,000 crore this financial year, out of which it has already raised Rs. 1,337 crore through a couple of private placements. With base issue size of Rs. 1,500 crore, IRFC plans to mop up all of the remaining Rs. 8,663 crore with this issue, including the green-shoe option to retain additional Rs. 7,163 crore.

I would call IRFC move to be brave enough to target such a large amount to be raised within a span of just eleven working days, which others have not been able to do even with two tranches of longer durations.

Coupon Rates on Offer – People who were hoping to get even higher interest rates and planning to diversify their portfolio with this issue and the NHB issue, have been left disappointed by the interest rates IRFC has fixed to offer. Coupon rates of IRFC have been 0.23% lower with the 15-year option and 0.03% lower for the 10-year option as compared to the NHB issue. As always, the non-retail investors will get 0.25% less rate of interest every year.

As compared to IIFCL as well, which is currently offering 8.66% p.a. for the 10-year option and 8.73% p.a. for the 15-year option, the rates are lower. So, the investors can still subscribe to the IIFCL issue if they haven’t already, as it is still undersubscribed in the retail investors category.

Rating of the Issue – IRFC is the financing arm of the Indian Railways with zero non-performing assets. It earns assured net interest margins (NIMs) from the Ministry of Railways (MoR) and other related entities like Rail Vikas Nigam Limited (RVNL) and RailTel.

Most importantly, in case of any default or shortfall in the money required to redeem these bonds, the MoR will be required to fund the payments due to the bondholders. So, there is minimal risk involved with these bonds and probably that is the reason all rating agencies, CRISIL, ICRA and CARE, have assigned ‘AAA’ rating to the issue.

NRI/QFI Investment – Non-Resident Indians (NRIs) are eligible to invest in this issue, on a repatriation basis as well as on a non-repatriation basis. Qualified Foreign Investors (QFIs) are also eligible to invest in the issue.

Investor Categories & Allocation Ratio – The investors have been classified in the following four categories and each category will have certain percentage of the issue size reserved during the allocation process:

Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue i.e. Rs. 866.30 crore is reserved

Category II – Non-Institutional Investors (NIIs) – 30% of the issue i.e. Rs. 2,598.90 crore is reserved

Category III – High Net Worth Individuals including HUFs, NRIs & QFIs – 20% of the issue i.e. Rs. 1,732.60 crore is reserved

Category IV – Resident Indian Individuals including HUFs, NRIs & QFIs – 40% of the issue i.e. Rs. 3,465.20 crore is reserved

Listing – The company has decided to get these bonds listed on both the stock exchanges i.e. National Stock Exchange (NSE) as well as the Bombay Stock Exchange (BSE). The bonds will get allotted and listed within 12 working days from the closing date of the issue.

Minimum & Maximum Investment – Unlike NHB, the face value of a bond in this issue has been fixed at Rs. 1,000 and as always, the minimum investment would remain Rs. 5,000 i.e. at least 5 bonds of Rs. 1,000 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.

Demat not Mandatory – An investor, as per his/her own choice, can subscribe for these bonds in either of the forms, demat or physical. Though it is mandatory to have a demat account to sell these bonds, you may subscribe to them in certificate form as well and can get them converted to demat form whenever you want.

Interest on Application Money & Refund – IRFC will pay interest to the successful allottees on their application money, from the date of realization of application money up to one day prior to the deemed date of allotment, at the applicable coupon rates. Unsuccessful allottees will get interest @ 5% per annum on their refund money.

Interest Payment Date – IRFC has decided to make its first interest payment on April 15, 2014 and subsequent interest payments will also be made on April 15 every year.

What would make you invest in this IRFC bond issue?

With NHB offering higher rate of interest for all maturity periods from Monday and IIFCL, HUDCO still open for subscription with higher rate of interest, what is that one thing which you think differentiates this IRFC issue from the rest of the issuers? Please share your views about it and let’s see if it makes sense to other investors also.

Application Form of IRFC Tax Free Bonds

NHB Tax-Free Bonds – Bidding Centres

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in IRFC tax-free bonds, you can contact me at +919811797407

{ 150 comments… read them below or add one }

Amlan Basak December 28, 2013 at 9:35 AM

Thanks Shiv for this post on IRFC TFB!
As you mentioned, I will go for IRFC mainly for diversification purpose.
Though both NHB and IRFC are AAA, I would prefer IRFC because the name IRFC/Railways is more familiar/known/popular than NHB. 🙂

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pradeep December 28, 2013 at 10:51 AM

yes that is true. i feel IRFC will exist has long as railways will. railways is really old institution, i dont see it disappering unless everyone get a helicopter to fly 😉

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Shiv Kukreja December 28, 2013 at 11:32 AM

That applies to the RBI as well Pradeep, but your point is equally valid.

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Shiv Kukreja December 28, 2013 at 11:22 AM

hmm, right… thanks Amlan for sharing it first !!

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George December 28, 2013 at 10:19 AM

My take is like this. NHB & IRFC both are strong institutions given the fact that they both are supported by RBI and MOR. One can consider investing in both to take care of diversification based on their investment. I will look at investing in 10 years bonds in IRFC and 15,20 years in NHB. The difference of interest rate of IRFC and NHB in 10 years is small. You also can wait to invest in IRFC rather than jumping on the first day considering the size of the bond. It will take full 1 month unless something drastically change in market interest rate. Thos looking for 10 years can wait to subscribe in IRFC which will give them a chance for looking at no issues like NHAI also.

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Shiv Kukreja December 28, 2013 at 11:30 AM

I agree with your thoughts George !! With IRFC, we don’t have one full month to decide though. But, you are right, no need to jump on to it in the first few days.

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George December 28, 2013 at 11:37 AM

Looking at the size, I will expect the IRFC to extend the closing day by 2 more weeks.

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Shiv Kukreja December 28, 2013 at 1:26 PM

hmm, quite likely, shifting it to February 20, 2014 probably… 🙂

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IKJOT December 28, 2013 at 5:46 PM

Having invested in HUDCO 1 & 2, PFC, NHPC, NTPC and IIFCL in last 2-3 months. I’m now putting a big chunk of my investment in NHB 20 year option . Also due to it being subsidiary of RBI I believe its equally safe as IRFC and btw am skipping IRFC issue just because of low interest rates. But still keeping some funds aside for NHAI in case it has better rates.

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Shiv Kukreja December 28, 2013 at 6:33 PM

I would call it a good strategy !!

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S S Bakshi December 30, 2013 at 9:25 AM

Would not quite agree on this. Yield on NHB per lakh would be Rs 8510/- and on IRFC Rs 8480/- on 10 yr option…a difference of only Rs 30/- per lakh per yr !

Considering the inherent strengths of both, NHB & IRFC it would be worthwhile investing in both the issues especially in view of the fact that interest rates for remaining Tax Free Bonds Issues are likely to move south. Also, some of the scheduled issues may not see the light of the day as in previous years.

10 yrs horizon is a safe bet in the current scenario. The temptation for 15/20yrs , with marginal interest rate differential, is best avoided.

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Shiv Kukreja December 30, 2013 at 10:19 AM

Different people have different opinions Sir. Most of the investors go for the 15-year or 20-year options and that makes me think that NHB is a better option than IRFC. There is liquidity factor also.

I agree with you that diversification is a must with all our investments, but relatively speaking, I’m more biased towards the NHB issue.

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George December 28, 2013 at 10:20 AM

I mean new issues coming up

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santonu December 28, 2013 at 4:12 PM

Can PVT CO issue TAX free bond

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Shiv Kukreja December 28, 2013 at 6:23 PM

No Santonu, private companies are not allowed to issue these bonds.

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S S Bakshi December 30, 2013 at 9:15 AM

“Application Form of IRFC Tax Free Bonds”……The Application Forms are NOT available at this link, given in your post above ??

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Shiv Kukreja December 30, 2013 at 10:22 AM

Application forms are yet to get uploaded on this link, it will get done sometime in the next couple of days time.

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Shiv Kukreja December 30, 2013 at 9:09 PM

Sir, IRFC application forms have got uploaded now, you can download it from the above pasted link.

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Ramesh January 3, 2014 at 5:21 PM

Deadly silence! No queries, No answers, Nothing more to learn? Have all of us become Financial Literates about Tax Free Bonds?

Any news about fortcoming issues during January, their compatative analysis and coupon rates expected?

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Shiv Kukreja January 3, 2014 at 5:40 PM

NHAI issue is expected to open sometime this month. Coupon rates are not announced as yet and comparative analysis is not possible till the rates are not announced.

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George January 3, 2014 at 6:23 PM

While waiting for the coupon rates, can we have some data on the financials of NHAI. The highlights of the balance sheet etc. As you know if the NHAI were to have a higher coupon like NHB ( Which I am not expecting, It will be mostly on par with IRFC 8.5-8.7 for 10 Year bond and 15 respectively), it is likely to get subscribed on first day itself and we will not have much to discuss. My experience of NHAI first issued bonds, they have done better than others. One of the reason was they had same coupon rates across and liquidity was better for the same season.

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Shiv Kukreja January 3, 2014 at 10:38 PM

Hi George,

I think there are better things to be covered in a post than just NHAI financials which in any case we’ll have to cover in its tax-free bonds issue as well. What do you think?

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George January 4, 2014 at 9:10 AM

Unlike other companies, I found some difficulty in figuring out the financials of NHAI from draft prospectus and also from their site. Since there are many issues coming and most of them are rated AAA by credit agencies, I feel it is very important to know the financial stability of the organization considering that the bonds are secured and asset base is very important. I have only requested to consider covering key futures based on Draft prospectus since there is not much time for people due to the oversubscription likely to happen. I leave it for you to cover what you think important in the post.

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Shiv Kukreja January 4, 2014 at 11:14 AM

Sure George, let me give it a try if I am able to cover it before the issue details get announced by the company.

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Ikjot January 4, 2014 at 1:40 AM

Hi Shiv,
Is this correct that bonds issued in 2012 had reduced interest rates for purchases made in secondary market? If so what is the case with recent issues (specially bonds issued in last 2-3 months)?

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Shiv Kukreja January 4, 2014 at 11:11 AM

Yes Ikjot, that is right. It used to happen last year for the bonds issued during FY 2012-13. This “step-down interest rate” clause is not applicable for the bonds issued during FY 2013-14.

I mentioned this positive development in the following post during August 2013 – http://www.onemint.com/2013/08/16/tax-free-bonds-notification-fy-2013-14/

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Ikjot January 4, 2014 at 4:06 PM

Thanks Shiv.

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Shiv Kukreja January 4, 2014 at 9:56 PM

You are welcome!

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Hemant January 4, 2014 at 9:35 AM

Hi Shiv,
A basic question
My demat statement shows the following entry for the last years IRFC bonds.

INDIAN RAILWAY FINANCE CORPORATION LIMITED 7.34/7.84 BD 19FB28 FVRS1000 LOA UPTO 18FB13/- Beneficiary Balance

From the above I could make out that
7.84 stands for interest rate
19FB28 : bond is upto 19th Feb 2028
FVRS1000 : face value Rs 1000/-
what is LOA UPTO 18FB13?
And how should I know the interest payment date from this entry?
If you could enlighten about the same it would be great. Thanks.

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Shiv Kukreja January 4, 2014 at 1:20 PM

Hi Hemant,

I am not sure what this LOA exactly stands for, but I think it seems to me as “Letter of Allotment” dated February 28th, 2013.

Interest Payment Date is February 19th every year.

http://www.bseindia.com/markets/debt/scripwise_tradereport_new.aspx?pagename=di&Scrip_ID=961756&isin_no=INE053F07579&scripcode=961756

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Hemant January 4, 2014 at 5:33 PM

makes sense. Thanks for the reply Shiv.

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Shiv Kukreja January 4, 2014 at 9:57 PM

You are welcome Hemant!

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Bhaskar January 6, 2014 at 7:11 AM

Commenting to subscribe the comments feed. I have parked the amount most likely to get refunded from NHB to IRFC today. Probably this will be my last tax free bond purchase. Already hold NHAI from previous years issue.

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Shiv Kukreja January 6, 2014 at 11:40 AM

That’s great Bhaskar!

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Shiv Kukreja January 6, 2014 at 6:29 PM

Day 1 (January 6) subscription figures:

Category I – Rs. 150.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 422.11 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 308.23 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 462.53 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 1,343.17 crore as against total issue size of Rs. 8,663 crore

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Ramadas January 6, 2014 at 7:07 PM

Hi Shiv

This is excellent. Looks like there is suddenly huge interest in tax free bonds. In spite of around 500 crore of additional retail money locked in NHB refunds and interest rate of IRFC much lower compared to earlier issues , 460 crore of retail subscription in IRFC is very good. What do you think is prompting retail to show a sudden interest in tax free bonds? After a series of TFB issues , i was not expecting such a welcome response for IRFC

Regards
Ramadas

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Shiv Kukreja January 6, 2014 at 11:08 PM

Hi Ramadas,

I think more and more retail investors are joining the party of high tax-free interest rates these bonds are offering. I think this is due to print media and online coverage of these bonds in large numbers. Also, people who missed out on earlier issues or who have large corpus of investible surplus, are also investing on the first day itself.

Some of the factors I mentioned in the NHB post are applicable to this IRFC issue as well. Let’s see what coupon rate NHAI carries for its tax-free bonds.

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Shiv Kukreja January 7, 2014 at 7:11 PM

Day 2 (January 7) subscription figures:

Category I – Rs. 160.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 440.70 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 325.70 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 577.62 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 1,504.32 crore as against total issue size of Rs. 8,663 crore

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KS January 8, 2014 at 8:50 AM

I presume these are ‘cumulative’ subscription figures as at end of day-2?

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Shiv Kukreja January 9, 2014 at 9:13 PM

Yes, these are cumulative figures.

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Paresh Patel January 7, 2014 at 9:43 PM

Please notify me of followup coments via e-mail

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Shiv Kukreja January 7, 2014 at 11:04 PM

I was surprised by the Business Line recommendation to avoid the IRFC issue, but then it makes sense to subscribe to the IIFCL issue which is offering higher rate of interest and the 20-year option as well.

http://www.thehindubusinessline.com/money-wise/irfc-bonds-give-this-one-a-miss/article5549091.ece

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Shiv Kukreja January 8, 2014 at 7:02 PM

Day 3 (January 8) subscription figures:

Category I – Rs. 160.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 450.35 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 351.54 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 650.87 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 1,613.06 crore as against total issue size of Rs. 8,663 crore

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Shiv Kukreja January 9, 2014 at 10:13 PM

Day 4 (January 9) subscription figures:

Category I – Rs. 160.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 469.91 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 398.84 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 698.72 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 1,727.76 crore as against total issue size of Rs. 8,663 crore

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KS January 10, 2014 at 5:16 AM

Apart from this IRFC and NHAI any other Tax Free Bond expected during this FY? I am keen to know, if any Issue will be open between 20-31 March 2014 as my SCSS deposit matures then. Is it a good idea to premature that? What will be the cost for that?

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Shiv Kukreja January 10, 2014 at 11:15 AM

IIFCL will launch its 3rd tranche and IRFC will launch its 2nd tranche sometime this year. Apart from that, IREDA, Ennore Port, Cochin Ship Yard and Airport Authority will also come up with their issues. But. I am not sure about the timing of their issues, so I cannot really comment whether any issue will be available at the fag end of this financial year or not.

Premature withdrawal of any investment requires proper analysis and it would differ from case to case.

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Ramesh January 10, 2014 at 6:48 AM

Yes, apart from me, there are several individuals I know, who would have surplus finds due to maturity of their Tax Saver FDs, FDs, SCSS and ELSS MFs. So last week of March is an important time for reinvestments.

Please do tell us if you are expecting some good issues or other investment avenues including TF Bonds during the last week of March especially good for senior citizens.
Please donot treat it as a personal issue but a common issue.
Thanks.

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Shiv Kukreja January 10, 2014 at 11:30 AM

I’ll try to work on this topic and present you the analysis to the best of my abilities. But, at present, tax-free bonds look to me as the best fixed income investment option and maturity proceeds of an investment could be considered for these bonds.

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jaspreet January 10, 2014 at 7:04 PM

Hi, 2 questions:
1. The NSE website (IPO current issues)shows this issue as oversubscribed, but as per ur numbers there is still a long way to fully subscribe this issue…can you pls clarify.
2. Is it worthwhile buying tax free bonds in secondary market…given that many are available at similar yields to new issues. What all should be considered while buying tax free bonds in secondary market.

Thanx in advance! I have found ur website recently and find it very helpful. Keep up the good work.

Regards,
Jaspreet

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jaspreet singh January 10, 2014 at 7:06 PM

Hi, 2 questions:
1. The NSE website (IPO current issues)shows this issue as oversubscribed, but as per ur numbers there is still a long way to fully subscribe this issue…can you pls clarify.
2. Is it worthwhile buying tax free bonds in secondary market…given that many are available at similar yields to new issues. What all should be considered while buying tax free bonds in secondary market.

Thanx in advance! I have found ur website recently and find it very helpful. Keep up the good work.

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Shiv Kukreja January 10, 2014 at 10:58 PM

Thanks Jaspreet!

1. The issue has been oversubscribed as per the base issue size of Rs. 1,500 crore, whereas I have considered the total issue size of Rs. 8,663 crore including the green-shoe option.

2. After considering the brokerage charges, if the yield to maturity (YTM) of the listed bonds is higher than the coupon rates of the new issues, then you can consider buying it from the secondary markets.

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Shiv Kukreja January 10, 2014 at 8:36 PM

NHAI Tax-Free Bonds issue opens January 15th. Coupon Rates – 8.52% for 10 years and 8.75% for 15 years. 20-year option is not there. It is rated ‘AAA’ and closes on February 5, 2014.

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Gaurav Malhotra January 10, 2014 at 9:01 PM

Thanks for the information. Glad I waited for NHAI before investing in IRFC 🙂

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Shiv Kukreja January 10, 2014 at 9:12 PM

Great! 🙂

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George January 10, 2014 at 11:02 PM

Great Shiv! I was tracking NHAI site frequently, but got the update from your site and now checked the NHAI site again. No other site has given this update and you have notified as soon as NHAI published the same. 15 Years is attractive though it is not as good as NHB coupon rate. Considering the reputation of last issues of NHAI, I am expecting the same response that NHB received and mostly allotment will be partial in this case also. Those applying should target 70% allocation and will have to be ready for that.

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Shiv Kukreja January 11, 2014 at 12:27 PM

Thanks George!

I would differ from your view that the response for this issue would be as great as the response for the NHB issue. I think the response would be closer or better than the IRFC issue, but not like the NHB issue. NHAI issue in 2012 got huge subscription as it was the first such issue after a very long time and the interest rates it offered were higher as compared to the FD rates. But, that is not the case this time around.

One positive thing for this issue would be that the investors would be putting their refund money from the NHB issue into these bonds. So, around 25% of the NHB money is expected to get pumped into these bonds.

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Ramadas January 11, 2014 at 12:50 PM

I agree with Shiv. NHB has a better credibility than NHAI though both are AAA. NHAI Interest rates offered are 25bps less than NHB. NHAI Issue size is much larger than NHB. NHB offered 20 year option and NHAI doesnt have that. All these put together NHAI will get much lower response than NHB , but bettter than IRFC. I am expecting issue to be closed in a week.
Regards
Ramadas

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George January 11, 2014 at 1:49 PM

Shiv, For NHB also, I have suggested 1-2 days and you were of the opinion that it will take a week. I do agree with you that NHB was a better bet than NHAI. But market perception NHAI has proven in bond market and good interest is there. Considering that the size is around 3.69 K crore issue, I think the issue is not very large and considering the recent interest in TF bonds and low interest rate of IRFC, I will expect better response that you have suggested. 15 Yrs is offering good coupon rate and the difference with NHB is just 13 Basis points. May be retail can go to 2nd day, but other categories are likely to get subscribed on day1.

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Shiv Kukreja January 11, 2014 at 2:12 PM

I wish I get proved wrong again with this issue also !! 🙂 Nothing better than a quick closure.

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George January 11, 2014 at 3:33 PM

Agree with you! Either way, quick closure is better for the investor. Less waiting period.

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Shiv Kukreja January 10, 2014 at 9:01 PM

Day 5 (January 10) subscription figures:

Category I – Rs. 160.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 494.08 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 409.74 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 748.39 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 1,812.51 crore as against total issue size of Rs. 8,663 crore

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George January 11, 2014 at 9:02 AM

Shiv one question? Is there any limit on individual retail investors for investing in Bonds/debentures during a financial year? As I understand , the limit for Capital gains bond is 50 Lakhs.

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Shiv Kukreja January 11, 2014 at 12:36 PM

No, there is no such limit on investment in these bonds/debentures. The limit of Rs. 50 lakhs is there only for the tax saving capital gain bonds.

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George January 11, 2014 at 1:50 PM

Thanks Shiv for the clarification.

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Shiv Kukreja January 11, 2014 at 2:12 PM

You are welcome!

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BRIAN January 11, 2014 at 12:46 PM

Good Day Shiv

Can NRI invest in NHAI tax free bonds that will open on Jan 15 th 2014.

Regards

Brian

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Shiv Kukreja January 11, 2014 at 1:24 PM

Thanks Brian and you too have a wonderful day today!

NRIs are not allowed to invest in the NHAI’s tax-free bonds this time around. So, they have only IRFC bonds to invest at this point in time.

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Jitendra January 11, 2014 at 6:49 PM
Shiv Kukreja January 11, 2014 at 9:01 PM

Though there is a difference between the way Indian Railways run and the business of IRFC, but I too have my doubts on the financial management in these public sector enterprises. That is why I preferred NHB over IRFC.

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Jitendra January 11, 2014 at 11:28 PM

Só does that mean – IRFC can survive irrespective of indian railways!!

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Shiv Kukreja January 11, 2014 at 11:45 PM

No, I never meant that. IRFC finances Indian Railways for the acquisition of new rolling stock and earns assured net interest margin in lieu of that. Indian Railways is the lifeline of India and I don’t think it can ever stop. No government can afford to stop the services of Indian Railways. Indian Railways is the responsibility of the Indian Government and IRFC is the responsibility of the Indian Railways. I think the financial standing of IRFC is better than Indian Railways.

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George January 12, 2014 at 9:14 AM

Just to add, IRFC is the financing arm of Indian railways just like NHB/HUDCO supports in housing. If Indian Railways goes into trouble , the GOI steps in. Railway budget takes care of Indian Railway and it is not seen as a profit making organization. Like Shiv mentioned, Indian Railway is the lifeline of the country. If you look at it from this view, Indian railway is run by GOI, IRFC is run by Indian Railway. This implies that IRFC is directly under MOR. Similarly NHAI is also to be looked at servicing organization more than a profit making organization. Both this issues, our trust will be on the GOI. So on paper both IRFC and NHAI is having same level of security. But in public mind NHAI bonds are more attractive considering that they issue Capital gains bonds through out. Since India is looking at developing more roads, NHAI will have more visibility in future. Railways is also looking at FDI investments. I personally feel , considering the nature of secured bond, these bonds are more safe than the rest of the debt components these companies will have.

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Shub January 13, 2014 at 10:27 AM

Sir,

Should we expect IRFC TFB tranche II in the current financial year?

Regards…

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Shiv Kukreja January 13, 2014 at 11:41 AM

Hi Shub,

If IRFC decides not to extend the current issue beyond January 20th, then I think we’ll have its tranche II as well. But, I think they’ll extend it. Inflation data this week will be important for the G-Sec rates.

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Shiv Kukreja January 13, 2014 at 11:25 PM

Day 6 (January 13) subscription figures:

Category I – Rs. 185.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 505.26 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 422.23 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 802.59 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 1,915.37 crore as against total issue size of Rs. 8,663 crore

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SB January 14, 2014 at 1:42 PM

Question on cancellation of application for IRFC tax free bonds: If someone has applied for IRFC tax free bonds, physical form, payment by cheque and cheque encashed, can he/she be able to cancel the application and get refund of amount paid (before allottment)?

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Sanjay January 14, 2014 at 3:00 PM

Dear SB,

You can cancel the application..please prepare a letter in below format..take a print sign the document. Email and Fax the letter to Issue Registrar.

To

xxxxxxxxx

Subject – Application withdraw – ______ Tax Free Bond

I have applied for the ______ Tax Free Bond for the issue opened on ________. I would like to withdraw my application, please don’t allocate any Bonds against my application.

My application details are mentioned below:

Application Number xxxxxx
Depository Name CDSL
Beneficiary Demat Number xxxxx
PAN
Applicant Name
Investor Category Retail (41)
Total Application Amount
Bonds Applied For
Cheque No
Bank Name

Enclosing the signed scanned copy of application withdrawal request for your reference. Please acknowledge the request and confirm for the application withdrawal.

Regards

(Sign here)
Name
Address –
Ph –
Email –

Please don’t forgot to fax this document…

Reply

Shiv Kukreja January 14, 2014 at 7:25 PM

Thanks a lot Sanjay for sharing this info and also the format!

Reply

Sagar Diwan January 28, 2014 at 3:18 PM

Hello friends,
Any idea about how to withdraw if the application was made through ICICIDirect ? I might have to call them and check.

Mr Rajan has decided to hike the rates for long term. So I wonder there may be better opportunities in near to medium term than IRFC.

Shiv, waiting for your review of the RBI policy and guidance !!!

Reply

SB January 14, 2014 at 3:33 PM

Thanks Sanjay!

And 1) how will I get the refund? by ECS to my bank account
2) Will Interest till date of refund be paid?

Reply

Shiv Kukreja January 14, 2014 at 7:34 PM

Hi SB,

1. Probably Sanjay missed that you applied for these bonds in physical form. You’ll get the refund credited directly to your bank account through ECS.
2. No interest gets paid on the applications which are withdrawn by the applicants.

Reply

Sanjay January 14, 2014 at 3:49 PM

1. The refund will go directly to the bank linked with your Demat Account.
2. I am not sure whether any interest will be paid on the withdrawal applications.

Reply

Shiv Kukreja January 14, 2014 at 8:49 PM

Day 7 (January 14) subscription figures:

Category I – Rs. 185.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 507.80 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 423.92 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 820.70 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 1,937.71 crore as against total issue size of Rs. 8,663 crore

Reply

SB January 14, 2014 at 11:46 PM

Thanks Shiv and Sanjay for your detailed clarification!

Last question – is partial withdrawal possible? For ex. if someone has initially applied for 200 bonds, now wants to withdraw to the extent of 100 bonds and retain the application for 100, will that be possible through the withdrawal letter format recommended by you?

Reply

Sanjay January 15, 2014 at 8:14 AM

I have never done partial withdrawal of the application. I will suggest to call the Registrar number or email them to find out about partial withdrawals. You can find the Registrar details in the Prospectus document.

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Shiv Kukreja January 15, 2014 at 8:00 PM

Day 8 (January 15) subscription figures:

Category I – Rs. 187.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 529.25 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 438.83 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 850.58 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,005.95 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja January 16, 2014 at 6:41 PM

Day 9 (January 16) subscription figures:

Category I – Rs. 187.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 535.07 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 456.28 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 875.84 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,054.49 crore as against total issue size of Rs. 8,663 crore

Reply

Tushar January 17, 2014 at 7:36 PM

Dear Shiv,
I hv applied for IRFC cat.IV, series I on 10th jan. When will I know my allocation status?

Generaly how many days they takes for allication after the issue closed?

Reply

Shiv Kukreja January 17, 2014 at 9:12 PM

Hi Tushar,

IRFC issue is still open. If it gets closed on January 20th, the company will allot you the bonds within 9-10 working days.

Reply

Shiv Kukreja January 17, 2014 at 10:09 PM

Day 10 (January 17) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 541.78 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 475.02 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 900.39 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,204.50 crore as against total issue size of Rs. 8,663 crore

Reply

SB January 18, 2014 at 1:12 PM

what are the chances of extension of IRFC beyond 20th Jan?

Reply

Shiv Kukreja January 18, 2014 at 9:01 PM

My guess would be as good as yours SB, but I think they should extend it.

Reply

Ramadas January 19, 2014 at 6:50 AM

Hi Shiv

Some questions on IRFC which i am not able to find satisfactory answers. I thought you will have some idea on those and posting this in this forum. Appreciate your inputs

Do you know from where IRFC gets money to pay us interest? I understand IRFC finances rolling stock of railways and transfers the assets to Indian Railways. Now , how does IRFC gets yearly interest to pay investors? Does Indian Railways budget that much amount in their budget to give to IRFC? When the bond gets matures , how will it eventually pay back investors? Considering this bond size , 15 years down the line , just wondering how will IR raise 10000 crore to pay back IRFC. Government will certainly ensure this bond is paid back , still there should be better processes within IRFC to get back bond amount from IR

Regards
Ramadas

Reply

Shiv Kukreja January 19, 2014 at 11:26 AM

Hi Ramadas,

It is a fairly simple query. The process is very much similar to a car loan. IRFC raises money from institutional/corporate investors or retail investors like us. Ministry of Railways (MoR) purchases rolling stock for the Indian Railways (IR) and the stock remains the asset of IRFC. The stock is leased to IR and the lease rate is close IRFC’s finance cost plus its net interest margin of 0.50% p.a. approximately.

As per the lease agreement, Ministry of Railways is required to pay up the shortfall in the funds IRFC needs to redeem these bonds. How good these processes are, only IRFC will be able to tell. One can file for an RTI to get more info.

Reply

Ramadas January 19, 2014 at 7:50 PM

Thanks Shiv. Appreciate your inputs

Regards
Ramadas

Reply

Shiv Kukreja January 20, 2014 at 12:09 PM

You are welcome!

Reply

SB January 20, 2014 at 11:55 AM

Looks like IRFC has extended the closure date by 3 weeks (to 7th Feb 2014).

Reply

Shiv Kukreja January 20, 2014 at 12:10 PM

That’s correct. IRFC issue closing date has been extended to February 7th, 2014.

Reply

Shiv Kukreja January 20, 2014 at 7:07 PM

Day 11 (January 20) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 590.98 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 496.89 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 943.01 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,318.17 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja January 22, 2014 at 12:02 AM

Day 12 (January 21) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 595.57 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 546.81 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 954.41 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,384.08 crore as against total issue size of Rs. 8,663 crore

Reply

vikram January 22, 2014 at 10:53 PM

I applied in irfc bond but now i want to cancel my application. Is it possible? If yes then what are the steps? Please guide me thanks in advance.

Reply

Shiv Kukreja January 22, 2014 at 11:44 PM

Yes Vikram, it is possible. Just contact Karvy Computershare, the Registrar for the IRFC bonds, with your application number and other investment details. They will let you know the exact procedure to cancel your application.

Reply

Shiv Kukreja January 23, 2014 at 12:46 AM

Day 13 (January 22) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 623.36 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 627.68 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 968.21 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,506.54 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja January 23, 2014 at 1:25 PM

IREDA has filed the Draft Shelf Prospectus with SEBI for its tax free bond issue on January 21st. The issue will be ‘AAA’ rated and NRIs are not eligible to invest in this as well.

Reply

Shiv Kukreja January 23, 2014 at 9:51 PM

Day 14 (January 23) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 703.97 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 682 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 982.50 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,655.77 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja January 24, 2014 at 6:40 PM

Day 15 (January 24) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 728.06 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 720.73 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 998.96 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,735.06 crore as against total issue size of Rs. 8,663 crore

Reply

vikram January 27, 2014 at 3:28 PM

Hello shiv How to check subscription status? Please provide me a link for this issue thanks in advance.

Reply

Shiv Kukreja January 27, 2014 at 6:43 PM

Hi Vikram,
Please check this link to have the complete subscription data on the BSE website:
http://www.bseindia.com/markets/publicIssues/DisplayIPO.aspx?id=753&type=DPI&idtype=1&status=L&IPONo=812&startdt=1/6/2014

Reply

Anand January 27, 2014 at 4:31 PM

HI Shiv,
IS IRFC STILL OPEN? WHEN IS THE CLOSURE DATE PLEASE?
THANKS

Reply

Ashok January 27, 2014 at 5:37 PM
Shiv Kukreja January 27, 2014 at 6:45 PM

Thanks Mr. Ashok for the link!

Reply

Shiv Kukreja January 27, 2014 at 6:44 PM

Hi Anand,
IRFC issue is still open and has been rescheduled to close on February 7th, 2014.

Reply

Shiv Kukreja January 27, 2014 at 9:24 PM

Day 16 (January 27) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 763.43 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 757.55 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 1,025.67 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,833.94 crore as against total issue size of Rs. 8,663 crore

Reply

SB January 28, 2014 at 7:28 PM

Curious to know today’s subscription data in the light of investors reaction to RBI announcement on interest rate hike by 25 basis points.

Reply

Shiv Kukreja January 28, 2014 at 10:43 PM

Day 17 (January 28) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 770.19 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 781.68 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 1,049.03 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,888.20 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja January 30, 2014 at 11:24 PM

Day 18 (January 29) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 775.68 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 787.80 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 1,066.79 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,917.57 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja January 30, 2014 at 11:25 PM

Day 19 (January 30) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 781.38 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 798.52 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 1,082.08 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 2,949.28 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja January 31, 2014 at 9:39 PM

Day 20 (January 31) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 789.63 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 829.63 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 1,102.98 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 3,009.54 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja February 4, 2014 at 11:15 PM

Day 21 (February 3) subscription figures:

Category I – Rs. 287.30 crore as against Rs. 866.30 crore reserved
Category II – Rs. 831.99 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 852.06 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 1,131.68 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 3,103.02 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja February 4, 2014 at 11:16 PM

Day 22 (February 4) subscription figures:

Category I – Rs. 287.55 crore as against Rs. 866.30 crore reserved
Category II – Rs. 909.43 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 880.16 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 1,156.41 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 3,233.54 crore as against total issue size of Rs. 8,663 crore

Reply

vikram February 6, 2014 at 12:25 PM

hello shiv, this issue will close tomorrow but i dont think green shoe option will fully subdcribe,then what will be the allotment process?

Reply

Shiv Kukreja February 6, 2014 at 6:31 PM

Hi Vikram,
It will be 100% allotment to all.

Reply

Shiv Kukreja February 7, 2014 at 12:00 AM

Day 24 (February 6) subscription figures:

Category I – Rs. 287.55 crore as against Rs. 866.30 crore reserved
Category II – Rs. 946.57 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 1,005.13 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 1,211.90 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 3,451.15 crore as against total issue size of Rs. 8,663 crore

Reply

Shiv Kukreja February 7, 2014 at 7:56 PM

Day 25 (February 7) subscription figures:

Category I – Rs. 637.55 crore as against Rs. 866.30 crore reserved
Category II – Rs. 1,250.46 crore as against Rs. 2,598.90 crore reserved
Category III – Rs. 1,048.51 crore as against Rs. 1,732.60 crore reserved
Category IV – Rs. 1,261.62 crore as against Rs. 3,465.20 crore reserved
Total Subscription – Rs. 4,198.14 crore as against total issue size of Rs. 8,663 crore

The issue got closed today and saw a very good response from non-retail investors on the last day.

Reply

vikram February 10, 2014 at 5:43 PM

Hello shiv how to know allotement?

Reply

Shiv Kukreja February 10, 2014 at 8:35 PM

Hi Vikram,
Allotment is not done as yet, it normally gets announced in 7-9 days time from the closing date of the issue.

Reply

SB February 10, 2014 at 6:05 PM

Is the basis of allotment finalized yet?

Reply

Karthik February 10, 2014 at 7:28 PM

Everyone should get full allotment since none of the categories are oversubscribed

Reply

Shiv Kukreja February 10, 2014 at 8:40 PM

That’s right, everyone will get full allotment.

Reply

Shiv Kukreja February 10, 2014 at 8:37 PM

Hi SB,
The issue got closed only on Friday and it will take some more time for the allotment to get finalized.

Reply

SB February 11, 2014 at 5:54 PM

Is IRFC tranche 2 likely in 2013-14? since they have collected less than half of the total issue size from tranche 1.

Reply

Karthik February 12, 2014 at 6:53 PM

In a Business Line article, IRFC has stated that they will come up with an issue before 31st March. So, it looks like there will be another tranche coming up. They might collect more funds if the coupon rate is better than the previous issue.

Reply

Shiv Kukreja February 13, 2014 at 1:02 PM

Yes, it is highly likely that IRFC will come up with the tranche II of its tax-free bonds.

Reply

SB February 19, 2014 at 1:49 PM

Has IRFC allottment started?

Reply

Karthik February 19, 2014 at 5:26 PM

Yes…..I received my allotment today

Reply

Rama February 19, 2014 at 6:24 PM

The bonds have been credited to my Demat yesterday night.

Reply

Shiv Kukreja February 21, 2014 at 9:43 AM

IRFC tax-free bonds have got listed on the BSE & NSE today i.e. February 21.

Here are the BSE & NSE codes for the same:

8.48% 10-year bonds – BSE Code – 961829, NSE Code – N9
8.65% 15-year bonds – BSE Code – 961830, NSE Code – NA

Deemed date of allotment has been fixed as February 18, 2014. Interest will be paid on April 15th every year.

Reply

Raj February 21, 2014 at 10:49 AM

Is tranche-II confirmed for Feb 24 ?

Reply

Shiv Kukreja February 21, 2014 at 11:28 AM

Not yet.

Reply

SB February 21, 2014 at 3:14 PM

Has anyone got refund from IRFC?

Reply

Raj February 21, 2014 at 6:51 PM

NHB has got approval for raising another 1000 crores in this fiscal.

Reply

Paresh Patel February 25, 2014 at 10:04 AM

Do you think Tranche 2 has a coupon rate of 8.80 %. Or more because 10 yrs G. Sec was 9.26 % yesterday. G Sec was between 9.19 %. To. 9.23 % since last few days.
I have already invested in recent IIFCL. 8.80 % bond.
Now I would like to invest more , so should I invest in IREDA. Or. IRFC if they give minimum 8.80 % coupon rate.
I have invested some amount in IRFC at the coupon rate 8.65 % last issue.

Reply

Setty March 4, 2014 at 4:45 PM

When was this issue (opened on 6th Jan 14)of IRFC Tax free bonds actually closed and when will the successful applicants get the bonds?

Reply

Shiv Kukreja March 4, 2014 at 11:28 PM

Hi Setty,
It got closed on February 7th. Investors must have received the allotment advice by now; not sure how many have received the bond certificate.

Reply

Setty March 5, 2014 at 3:29 PM

Thanks for the information Shiv.

Reply

Shiv Kukreja March 5, 2014 at 3:30 PM

You are welcome!

Reply

Shiv Kukreja April 25, 2014 at 5:31 PM
Setty April 25, 2014 at 8:59 PM

Very surprising that Sonia Gandhi has not opted for the Demat mode.

Reply

Paresh Patel May 24, 2014 at 2:16 PM

Hi Shiv
I have a question for HUDCO. N 2. Bond issued on. 05 / 03 / 2012. – 8.20 %
If I purchase from the market what will be my coupon interest rate for Trust a/c. (. A O P. ).
It will be same as 8. 20 %. Or. Less.
Please response me.
Thanks

Reply

Shiv Kukreja May 25, 2014 at 1:14 PM

Hi Paresh,
You will get 8.20% p.a. rate of interest if you buy 15-year HUDCO bonds in your trust’s name.

Reply

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