HUDCO 7.64% Tax-Free Bonds – Tranche I – January 2016 Issue

by Shiv Kukreja on January 21, 2016

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

In the last 10 trading days or so, some major stock markets all over the world have plunged more than 10%. I think this could be the worst fall for the global stock markets since 2008-09, when the US economy was badly hit by the subprime mortgage crisis. In India also, stock prices across sectors have fallen 20-40% in a very short span of time to touch their lowest levels since August 2013.

Investors are scared to check their stock portfolios as there is a big value erosion out there and margin calls have started to get triggered. As the situation is turning from bad to worse, investors are looking for safe havens to protect their hard-earned money. In such a scenario, what could be a safer place to park your money than ‘AAA’ rated tax-free bonds issued by a government company.

HUDCO will be launching its public issue of tax-free bonds from January 27, offering a coupon rate of 7.64% for 15 years and 7.27% for 10 years. The company will try to raise Rs. 1,711.50 crore in this offer, including the green-shoe option to retain oversubscription to the tune of Rs. 1,211.50 crore. Though the issue is scheduled to close on February 10, I think it should get oversubscribed on the first day itself in all the four categories of investors.

Before we analyse it further, let us first check the salient features of this issue:

Size of the Issue – HUDCO is authorized to raise Rs. 5,000 crore from tax free bonds this financial year, out of which the company has already raised Rs. 1,288.50 crore by issuing these bonds on a private placement basis during July-October period.

Out of the remaining Rs. 3,711.50 crore, the company will try to raise Rs. 1,711.50 crore in this issue. However, it is still not clear whether HUDCO would raise the remaining Rs. 2,000 crore this financial year or surrender the allocated amount back to the government.

Rating of the Issue – CARE and India Ratings have assigned ‘AAA’ rating to the issue, thus suggesting that these bonds carry highest degree of safety regarding timely payment of financial obligations. Moreover, these bonds are ‘Secured’ in nature i.e. in case of any default, the bondholders would carry a right to make claim on certain assets of the company.

Coupon Rates on Offer – NHAI, which was the last ‘AAA’ rated issue this financial year, offered 7.60% coupon for its 15 years option and 7.39% for 10 years. As 10-year G-Sec yield has fallen and 15-year G-Sec yield has risen since then, HUDCO bonds will carry 7.64% for the 15-year option and 7.27% for the 10-year option.

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For the non-retail investors, these rates would be lower by 25 basis points (or 0.25%).

NRI/QFI Investment Not Allowed – Non-Resident Indians (NRIs) and Qualified Foreign Investors (QFIs) are not eligible to invest in this issue as well.

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) – 20% of the issue is reserved i.e. Rs. 342.30 crore

Category II – Non-Institutional Investors (NIIs) – 20% of the issue is reserved i.e. Rs. 342.30 crore

Category III – High Net Worth Individuals including HUFs – 20% of the issue is reserved i.e. Rs. 342.30 crore

Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 684.60 crore

Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first come first serve (FCFS) basis in each of the investor categories, based on the date of upload of each application into the electronic system of the stock exchanges.

Listing & Allotment – Bombay Stock Exchange (BSE) is the only stock exchange where HUDCO bonds will get listed. The company will allot the bonds and get them listed within 12 working days from the closing date of the issue.

Demat A/c. Not Mandatory – It is not mandatory to have a demat account to apply for these bonds. Investors have the option to subscribe to these bonds in physical/certificate form as well. Whether you apply for these bonds in demat or physical form, the interest amount will still get credited to your bank account directly through ECS.

Also, even if you get these bonds allotted in your demat account, you will have the option to rematerialize your bond holding in physical/certificate form if you decide to close your demat account in future.

No Lock-In Period – These tax-free bonds are freely tradable and do not carry any lock-in period. The investors may sell them at the market price whenever they want after these bonds get listed on the stock exchanges within 12 working days of the closing date.

Interest on Application Money & Refund – Successful allottees will earn interest at the applicable coupon rates i.e. 7.27% p.a. for 10 years and 7.64% p.a. for 15 years on their application money, from the date of realization of application money up to one day prior to the date of allotment. Unsuccessful allottees will get interest @ 5% per annum on their refund money.

Minimum & Maximum Investment – Investors are required to put in a minimum investment of Rs. 5,000 in this issue i.e. at least 5 bonds of face value Rs. 1,000 each. There is no upper limit for the investors to invest in this issue. However, an investor investing more than Rs. 10 lakhs will be categorized as a high networth individual (HNI) and will get a lower rate of interest as applicable.

Interest Payment Date – HUDCO will make its first interest payment exactly one year after the date of allotment and the date of allotment will be announced as the company allots its bonds to the successful applicants.

Record Date – For the payment of interest or the maturity amount, record date will be fixed 15 days prior to the date on which such amount is due to be payable.

Should you invest in this issue?

Global crude oil prices have plunged to their lowest levels since May 2003 and are currently trading at $26.76 per barrel as I write this line. Commodity prices are also falling sharply as China has suffered from its slowest GDP growth in 25 years. 10-year treasury note yield in the US has fallen below 2%, even as the US Fed has announced its decision to hike interest rates there. All these events suggest that there is a major demand slowdown out there which could potentially push some of the major economies back into some kind of recessionary environment.

Amid such a cruel slowdown, I am surprised (and disappointed also) how India is still having a high CPI inflation and why the RBI is still reluctant to cut interest rates when the economy badly requires low levels of rates in order to keep floating for survival. I strongly believe that there is an urgent requirement for the RBI to cut interest rates and not to wait for its next monetary policy on February 2nd to take any such action.

I think HUDCO issue is an opportunity for the risk-averse investors to invest their money for a healthy tax-free return for a long period of time. This could be one of the last couple of issues available for the investors this financial year to earn a risk-free income. Moreover, if the RBI obliges with a 25 or 50 basis points rate cut, we could see coupon rates falling sharply in the next bond issue by NHAI.

Application Form for HUDCO Tax Free Bonds

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 HUDCO tax-free bonds, you can contact me at +919811797407

{ 238 comments… read them below or add one }

Sandeep January 21, 2016 at 11:49 AM

Hello Shiv:

Would it not be better to buy TFBs with higher interest rate from secondary markets? Even after the higher price and discounting of interest rate for present year, they would – over the balance period (say 12/13/14 years) be giving more than the 7.64% that Hudco is giving now?

Regards,
SKR

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Shiv Kukreja January 21, 2016 at 2:46 PM

Hi Sandeep,
I think all or most of the tax-free bonds are trading at a yield lower than their original coupon rates. In case any of the bonds is trading at a yield higher than HUDCO coupon rates adjusted for brokerage and other expenses, then you should definitely buy those bonds than HUDCO bonds.

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pradeep January 21, 2016 at 10:50 PM

Sir,

Can we buy NTPC bond as allocation was just 10%. Will I get same rate as was promised during the issue offering.

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Shiv Kukreja January 21, 2016 at 11:07 PM

Yes Pradeep, you’ll get the same rate of interest, but your total investment should not cross 1000 bonds.

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Raju January 21, 2016 at 8:18 PM

Thanks for the update Mr Shiv.

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Shiv Kukreja January 21, 2016 at 10:32 PM

You are welcome Raju!

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Sandip. M January 21, 2016 at 9:53 PM

Hello Shiv,
I have already been allotted TFB by IRFC and NHAI for 7 lacs ( 10 years)and 10 lacs (15 years) respectively. Should I consider investing in HUDCO further.

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Shiv Kukreja January 21, 2016 at 10:36 PM

Hi Sandip,
That is something you need to decide. You should invest as per your asset allocation. HUDCO issue is also ‘AAA’ rated as IRFC and NHAI issues were. So, if your asset allocation permits you to invest in more of debt, then you should go ahead & invest in HUDCO bonds as well.

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George January 23, 2016 at 6:19 AM

Sandip, Shiv answered it apt. If you have enough fund and want to be sure whether Hudco is the right TFB. You should go ahead. Hudco got promoted from AA+ to AAA where as IREDA was AA+. As a retail customer I will not worry much about AAA and AA+. But it all depends on your overall savings and how much you want in TFB.Don’t bet all in one instrument like having all eggs in 1 basket. Have a diversified portfolio of investments and diversified TFB portfolio.

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Sandip. M January 25, 2016 at 10:41 AM

Thanks Shiv and George. I have one more query. What is the best way recommended to utilise annual interest received from TFB by investing it to add up towards the overall maturity date and amount of the principal of TFB.
Thanks
Sandip

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Shiv Kukreja January 28, 2016 at 12:42 AM

Invest in Equity MFs.

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Bhaskar January 21, 2016 at 10:43 PM

Subscribing to comments

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pradeep January 21, 2016 at 10:45 PM

Looks like it may be 30-40% allocation for retail investors. what do you feel Shiv sir?

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Shiv Kukreja January 21, 2016 at 11:05 PM

Yes Pradeep, even I think it should be in this range only, or probably between 25-35%.

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George January 22, 2016 at 9:19 PM

Shiv, If the expectation is below 50% allocation, Is it worth locking the money for just 10-15 basis points considering that most of the recently allotted bonds are trading at 7.5- 7.55% YTM. IRFC is still trading at 1002 -1003 level and 6.5 Rs interest already accrued. If one were to pay 6-7 rs as brokerage still he can expect 7.5%. For a customer who is not having 10 Lakhs worth bonds can still consider buying these bonds from secondary market. The amount will not get locked and no waiting for the refund and allocation. For those who have exhausted retail limit and looking for diversification, it is worth giving a shot. AIR shows full amount in reporting even if 10% allocation happens for all those who apply more than 5 Lakhs which is not fair on the part of the company sharing the info considering that the major amount is refund.

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pradeep January 22, 2016 at 11:59 PM

That is true. If somebody applied 1 lakh in 5 issues and gets 10 % in each issue. His investment is just 50,ooo but IT will think he has 5 lakhs.

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Shiv Kukreja January 23, 2016 at 5:00 PM

If your application is of Rs. 5 lakhs, then you have Rs. 5 lakhs, don’t you?

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pradeep February 7, 2016 at 9:00 PM

That is true only if it is 100% allocation. We are seeing allotment as less as 13%. Please correct if I am wrong.

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pradeep January 23, 2016 at 12:10 AM

when does AIR reporting happen ? Is 5 lac limit per issue or total?

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George January 23, 2016 at 9:12 AM

If applied in one company above 5L in single or jt account. If some one applies in 2 joint accounts 10 each. 20 will appear and actual allocation will be 3 or 4. If applied for few companies the amt will look huge whereas the actual will be very low. May be Shiv will have more clarity on this.

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Shirish January 23, 2016 at 9:39 AM

Why worry about AIR reporting? If you are paying your taxes honestly, it does not matter what IT dept thinks. We should not be unduly worried about IT scrutiny. Having said that it is important to keep your paperwork in order. The IT dept knows that nothing much comes out of scrutiny of the salaried class and current trend is not many are getting scrutiny notice.

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Shiv Kukreja January 23, 2016 at 5:01 PM

I agree Shirish!

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pradeep January 23, 2016 at 2:28 PM

Which one do you suggest to buy – IRFC or NTPC. I am looking for 10 years bond.

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Shiv Kukreja January 23, 2016 at 5:05 PM

George, this one is for you, please respond. Thanks!

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George January 23, 2016 at 5:15 PM

If you are particular about 10 Yrs, you can try NTPC but the issue is small volumes and not competitive pricing. I am not monitoring IRFC 10 Yrs bond, but I think you can buy the same.

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George January 23, 2016 at 5:11 PM

IRFC 15 Yrs bond is available at reasonable rate and good volume.

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Chaitanya January 23, 2016 at 4:49 PM

How does it matter whether company shows in AIR or not? Anyways you need not pay tax on these bonds interest, so whats there to hide?

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Shiv Kukreja January 23, 2016 at 5:06 PM

I agree Chaitanya!

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George January 23, 2016 at 5:25 PM

I do agree with your view on applying , only pointing out to the way of reporting by companies which can project big amount invested where as most of the amount is refund. I am sure the reporting helps in more transparency. It would have been better to report how much was actually allotted also. Any way, it doesn’t matter as you have rightly pointed out.

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Shiv Kukreja January 23, 2016 at 4:58 PM

Hi George,
1. Personally, I would go for the HUDCO issue with all my capacity (obviously up to Rs. 10 lakh). Once I have the final subscription numbers on the first day, only then I’ll decide whether I need to wait for the NHAI Tranche II or go for any other bond issue (including HUDCO) from the secondary markets. Why to go for 7.50% yield when you are getting 7.64%?

2. I don’t care about AIR reporting and I don’t think there is anything unfair here. If I know I’m clean, then why live my life scared about taxmen knocking my door. Tax evaders should feel ashamed about it, rather than scared.

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George January 23, 2016 at 5:42 PM

Shiv, I would definitely apply for HUDCO if there is a chance of 50% allotment or above. If that is not the case, I feel the money gets blocked for 2 weeks. I am sure those who have enough money to apply in issues upto maximum retail limit of 10 Lakhs should be able to do so. Since you mentioned the possibility 30-35% allotment, I was feeling that it is better to look for already available bonds rather than waiting for refund and allotment with 5% taxable interest for the period money gets blocked. I was particularly unhappy with the way the partial allotment of NTPC, PFC, REC took place though I did not apply to maximum limit due to fund shortage. At that time there was no other TFB giving 7.5% in the market as well. Looking at the volume of trading happening in PFC,NTPC,REC bonds compared with IRFC & NHAI suggests that the liquidity will determine the price in the market. The price will be reasonable for buyers and sellers. If HUDCO would have come up with 1 trache of 3500 Crore, it would have been much more interesting from the point of Allotment and liquidity. Once again , I would like to appreciate how Shiv made this blog interesting over the years when ever TFB issue was coming up. I can see many of the contributors in this blog are regular and I am one among them. Though I am not a big time investor, I feel proud to be part of this and contribute little bit from my side to this blog and definitely benefited myself also.

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Chaitanya January 24, 2016 at 11:24 PM

Yes, Kudos to Shiv in making this blog interesting with TFBs..

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Shiv Kukreja January 25, 2016 at 12:09 PM

Thanks a lot George, thanks Chaitanya!

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Chaitanya January 22, 2016 at 8:42 AM

When are IREDA refunds expected? Will it happen by next monday?

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Shiv Kukreja January 22, 2016 at 10:25 AM

Hi Chaitanya,
IREDA refunds should happen today.

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Chaitanya January 24, 2016 at 11:25 PM

Super, got it exactly that day 🙂

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Shiv Kukreja January 25, 2016 at 12:09 PM

That’s great! 🙂

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Janaki January 22, 2016 at 9:16 AM

Subscribing for comments

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Shirish January 23, 2016 at 9:43 AM

It is disappointing to note that NRIs are not allowed in this issue. NRI investors were allowed to invest in all previous Hudco tax free bond issues. Is upgrade of credit rating has something to do with this decision?

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Shiv Kukreja January 23, 2016 at 5:07 PM

Don’t know Shirish why HUDCO has decided to keep the NRIs away.

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Anonymous January 23, 2016 at 10:36 AM

Hi Shiv,
the 10 lac limit is it cumulative of all HUDCO subscriptions across various years . I mean assume, i have invested 2 lacs in 2013 in HUDCO NCD and now i can only invest max of 8 lacs so that i will recieve the retail investor coupon rates or i can invest upto 10 lacs again in jan 16 offer.

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Shiv Kukreja January 23, 2016 at 5:18 PM

Hi Anonymous,
Rs. 10 lac limit is for each issue. You can apply for Rs. 10 lac in this HUDCO issue and still earn a higher rate of interest.

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Pankaj January 23, 2016 at 9:38 PM

I have an RD at 9.5% rate of interest. Is it liquidate it to subscribe to HUDCO bond. Iam comming in IT 20% tax bracket.

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Pankaj January 23, 2016 at 9:38 PM

Is it advisable to liquidate it

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George January 24, 2016 at 12:05 AM

RD with 9.5% is really good at current interest levels. Your yield is almost 10% and you will get 8% after 20% tax. Do not break this for TFB. Shiv what you think.

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Pankaj January 24, 2016 at 8:18 AM

Thanks George.

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Shiv Kukreja January 25, 2016 at 12:29 PM

Hi Pankaj,
I think these tax-free bonds are better than RDs/FDs due to many reasons:
1. There is no TDS with tax-free bonds.
2. There are no premature withdrawal charges.
3. There is a scope of capital appreciation as well in case interest rates go down.
4. You can sell these bonds whenever you need money.
5. Issuers are some big government companies.

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nitesh January 24, 2016 at 6:03 AM

very correct george and also don’t break any rd fd or tax free bonds for a new taxfree bonds because of over subscription you will not get full allotment only 30 40 percent allotment you can get isn’t it dear shiv

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Pankaj January 24, 2016 at 8:19 AM

Thanks Nitesh.

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Shiv Kukreja January 25, 2016 at 12:39 PM

Liquidating your existing fixed income investment for these tax-free bonds is not advisable, it should be done only on a selective basis. But, for fresh investments, tax-free bonds are good and partial allotment should not be a deterrent.

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George January 25, 2016 at 5:17 PM

Shiv, Unfortunately many of us are not able to find fresh investments. Most of the cases it is a trade of with FD, MF etc. When we liquidate one and look for TFB, if reasonable allocation do not happen then we may not find better opportunity to invest in another instrument considering that interest rate is down. Yes I fully agree with you that partial allotment should not be a deterrent provided the fund is available and not made available.

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Shiv Kukreja January 25, 2016 at 6:08 PM

Hi George,
I think one should consider other options only when tax-free bond options are exhausted. I mean you should invest in FDs/RDs/Debt MFs etc. when TFBs are not there. Refunds come in 7-8 working days, so I think we can wait for this much time. Avoiding TFBs due to partial allotment doesn’t make sense to me.

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George January 25, 2016 at 7:19 PM

I think my statement was not correct. I meant no money for fresh investments. Most of the time break FD or Redeem MF to meet the cash required.

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Chaitanya January 26, 2016 at 10:43 AM

Personally, I’m breaking recently made FDs to invest in TFBs – since interest lost/penaly will not be more.
And I’m not breaking FDs which are maturing in few months to an year, as significant interest will be lost in such cases.

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George January 26, 2016 at 11:27 AM

Yes Chaitanya, same here. FDs that was made or renewed in last 6 months where interest rate was from 7.5 to 8.5% are considered for liquidity. Offcourse , there is interest loss due to short term and also the penalty. So far it was ok since we were expecting new issues. Now we are only left with NHAI and HUDCO 2nd issues. May be some new issues can be expected if the NHAI surrendered portion is given to other companies. Let us hope we will get resonable allocation in HUDCO and as advised by Shiv, I will consider moving some more fund to TFB considering that we do not get this opportunity always.

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Shiv Kukreja January 27, 2016 at 6:48 PM

I think that is the right strategy.

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Janaki January 27, 2016 at 7:04 PM

Hi Chaitanya and George,
I did not liquidate my FDs. Instead I borrowed loan on FDs from the banks. The banks charge around 0.5% to 1.25% more than the FD interest rate. There are no processing charges as well. I received the loan amount in 15 minutes. Based on the discussions in this forum, I expected allotment of about 40%. Once I get the refund, I would close the loans. The loan interest charges for 10 days (maximum period for allotment and refund) is very less. Also, I could retain the FDs.

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Shiv Kukreja January 28, 2016 at 12:38 AM

This one is even better. 🙂

Chaitanya January 30, 2016 at 11:26 PM

Good idea!

Mahesh March 1, 2016 at 2:26 PM

This debate of RD, FD and TFB is very interesting. The interest we get on TFB is yearly. When it comes to RD and FD, I feel one should look at yield rather than interest rates alone. Yield would be equal to interest and whether

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Mahesh March 1, 2016 at 2:37 PM

Sorry for interruption.

This debate of RD, FD and TFB is very interesting. The interest we get on TFB is yearly.
When it comes to RD and FD, I feel one should look at yield rather than interest rates alone as that is right comparison. Yield would be equal to interest if one is taking interest at regular interval in FD. If FD is cumulative in nature, yield would depend upon period and it could be attractive if one is in tax bracket up to 20%. In addition, one may also look at the period left and reinvestment risk while taking such decisions. Therefore breaking FD in a hurry may not be correct.
Comments are welcome.

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sudhakara January 24, 2016 at 9:22 AM

I failed to get allotment in IRFC TFB. Ihave parked the fund in ICICI liquid Fund. Is it sensible to redeem and subscribe to HUDCO TFB. The liquid fund carries no exit load.

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sudhakara January 27, 2016 at 3:18 PM

Thanks for the post.I am no longer waiting for a response. Took a decision to redeem from liquid fund and bid for my application for HUDCO TFB has been uploaded couple of hours back. Awaiting the outcome. I am of course reading the speculations on possible percentage of allotment !

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S.K. January 24, 2016 at 1:47 PM

Dear Mr. Shiv Kukreja,

Refunds of Application Amount for NTPC/REC etc TFB’s were accompanied by 2 types of Interest amounts:

1) Interest on ‘Refund Amount’ &
2) Interest on ‘Allotment Amount.’

Please clarify which or both these interest amounts are Tax-Free and how are they to be shown in our ITR.

Thank you.

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Sandip. M January 25, 2016 at 10:58 AM

SK,

Interest on refund amount is paid at 5percent and taxable. It has been paid by deducting 10percent TDS already.

Interest on allotment amount is paid at the coupon rate and non taxable .

Even I would like to understand how to show taxable interest on refund amount on ITR and pay remaining tax as I am in 30percent bracket.

Sandip

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Shiv Kukreja January 25, 2016 at 12:44 PM

That’s not correct Sandip! Both these interest amounts are taxable. It should be treated as interest income under income from other sources in your ITR.

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Sandip. M January 26, 2016 at 6:06 PM

What I understand is that interest at coupon rate is tax exempt for TFB, isn’t it , then why is interest received taxable as mentioned by you, thanks
Sandip

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Shiv Kukreja January 27, 2016 at 6:51 PM

Hi Sandip,
Tax-free interest period will start from the date of allotment till the date of maturity. Interest on application money as well as on refund amount is taxable.

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pradeep February 7, 2016 at 9:01 PM

How do we get the details. Does it show up in form 26as ?

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RS January 25, 2016 at 6:58 AM

Hi Shiv, can I apply directly thru my demat ac online or need to go thru a brokerage firm? What is bidding?

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Shiv Kukreja January 25, 2016 at 1:02 PM

Hi RS,
If online facility is provided by your broker, you can apply for these tax-free bonds directly through your demat account. Bidding is mandatory for your online as well as offline applications. When you apply through your demat account, bidding is done by your broker after your application gets submitted. But, when you apply offline, bidding is required before your application is submitted to one of the designated bank branches. Bidding is a process in which the details of your application get submitted to the exchange and a Bid Id gets generated unique for each application.

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RS January 25, 2016 at 9:52 PM

Thanks Shiv.

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Shiv Kukreja January 25, 2016 at 10:20 PM

You are welcome RS!

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Anuj January 25, 2016 at 5:31 PM

Why is it so that NHAI was not subscribed 100% in retail but these are getting over subscribed?

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Shiv Kukreja January 25, 2016 at 6:19 PM

Hi Anuj,
This is primarily due to the issue size and credit rating of the company. NHAI was a big issue of Rs. 10,000 crore. Rest all other companies, including NTPC, PFC, REC, IRFC and IREDA, could raise only Rs. 8,348 crore in 5 of their issues.

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Sanjay January 25, 2016 at 6:43 PM

Hi Shiv,

I have one question – NHAI issue that just got listed has an interest date of 01-Apr-2016 and normally the eligible holders get decided 15 days in advance and then the price gets reduced considering the interest part. After the declaration of Interest on 15th March and If I sell the bonds on 16th March. Can I show this a short term loss in my ITR? e.g. price on 15th March – 1030 , price on 16th March – 995. Allotment Price – 1000, so the net loss of Rs 5 (995-1000)? Tax free interest on 1st April.

Thanks in advance for answering!!

Regards
Sanjay

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Shiv Kukreja January 25, 2016 at 10:19 PM

Yes Sanjay, you can do so. There is nothing wrong in it. But, keep in mind the brokerage expenses and other taxes involved.

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Sanjay January 25, 2016 at 11:15 PM

Thanks for prompt reply.. What do you mean by other taxes involved?? My main purpose is to book a short term loss in this finacial year and also to enjoy tax free interest in 1st April.

I hope this should be fine as per Income Tax laws.

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Bhaskar January 25, 2016 at 11:33 PM

At least for equity shares or mutual funds – The notional loss caused by the dividend payment can be claimed as loss only if the units were bought three months before the record date or are held for at least nine months after dividend payment. If the units are sold before 9 months, the loss will be disallowed under Sec 94(7) of the Income Tax Act. This is what is called “dividend stripping”

I would think something similar we can assume for the tax free bonds.

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Shiv Kukreja January 27, 2016 at 6:59 PM

1. Other taxes include STT and stamp duty etc. which are levied along with the brokerage charges.
2. Yes Sanjay, it is perfectly fine as per the Income Tax laws.

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Sanjay January 27, 2016 at 10:09 PM

Thanks again.. There is no STT on tax free bonds only brokerage and little bit SEBI, stamp duty charges

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S.K. January 26, 2016 at 3:11 AM

Dear Mr. Shiv Kujreja,
Could you please confirm the following or clarify further:
1) Int. On TFB’s is to be shown under ‘EXEMPT INCOME: Interest’ in ITR.
2) Dividend earned on LIQUID MF’s Daily Dividend Scheme on which Tax is already deducted @28.5% is also to be shown under ‘Exempt Income: Dividends’ in our ITR.
Thank you for answering our queries.

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Shiv Kukreja January 27, 2016 at 7:30 PM

Hi S.K.,
1. Yes, that is correct.
2. Yes, this is also correct.

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Anonymous January 27, 2016 at 8:26 AM

Hi Shiv,
One query on the above and like Tax free NCDs. In case of event of death of the investor (retail investor), are we likely to get the principal back on maturity and how. is there any process. or do we forego the entire amount. Is the NCDs paid back to the Demat account holder or the nominee registered with the Demat holding bank(e.g ICICI securities )

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Shiv Kukreja January 27, 2016 at 7:29 PM

Hi Anonymous,
There is nothing to be worried in case of the unfortunate demise of the applicant. In such cases, bond entitlement changes from the applicant to the nominee/legal heir of the applicant. The investment amount/interest remains 100% safe.

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Raju January 27, 2016 at 11:59 AM

Cummulative Series and Quantity for Housing and Urban Development Corporation Limited
At BSE-NSE
Last updated on
Jan 27 2016 11:00AM
Series BSE + NSE Quantity
Series1 9,36,293
Series2 40,27,655
Series3 7,12,034
Series4 21,39,048
Total 78,15,030

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Raju January 27, 2016 at 12:01 PM

Lot of response for hudco tax free issue .Better to buy in secondary market different company.

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Chaitanya January 27, 2016 at 1:56 PM

Oversubscribed already.. as expected

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SB January 27, 2016 at 2:10 PM

what is the expected allotment ratio?

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George January 27, 2016 at 3:23 PM

Mostly 50%

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George January 27, 2016 at 5:07 PM

Based on 5PM subscription 48.5% allocation is possible.

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Dr KR Sharma January 27, 2016 at 3:12 PM

Dear Shiv and George,
I could not invest in NHAI TFB issue on the first day as my bid amount was blocked in IRFC TFB issue.Soon after I received a partial refund,due to partial allocation,from IRFC,I did an online bid in HNI category on December 24,2015 ahead of the December 31,2015 closing date in the NHAI TFB issue.Yet,my entire bid fell through though this is the largest TFB issue in this season.I could not bid for the IREDA TFB issue too as my bid amount was held up with NHAI TFB issue.This clash in schedule of TFB issues must have disturbed the bid plans of many other investors.What are your suggestions and comments to circumvent this
hurdle,Shiv and George?

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George January 27, 2016 at 3:27 PM

I think NHAI HNI got oversubscribed on first day itself. The retail was undersubcribed until closure for NHAI. I am not sure what was the amount you was bidding for under HNI. If I were to be in your place , I would have bid for Retail maximum and could have availed 7.6% coupon also. Retail got 100% allocation for those all applied.

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George January 27, 2016 at 3:35 PM

I am sure Shiv will be able to give better perspective

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Dr KR Sharma January 27, 2016 at 3:42 PM

George,thanks so much for your precious advice.I will follow it the next time around for sure.

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Shiv Kukreja January 27, 2016 at 7:10 PM

Hi Dr. Sharma,
Had you applied for these bonds under the retail category and that too strategically, you would have received back your funds on time as well as a decent allotment of all these issues. And, not to miss, a higher rate of interest.

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Shiv Kukreja January 27, 2016 at 6:09 PM

Day 1 (January 27) subscription figures:

Category I – Rs. 1,205.12 crore as against Rs. 342.30 crore reserved – 3.52 times
Category II – Rs. 2,454.02 crore as against Rs. 342.30 crore reserved – 7.17 times
Category III – Rs. 1,113.38 crore as against Rs. 342.30 crore reserved – 3.25 times
Category IV – Rs. 1,406.07 crore as against Rs. 684.60 crore reserved – 2.05 times
Total Subscription – Rs. 6,178.59 crore as against total issue size of Rs. 1,711.50 crore – 3.61 times

HUDCO issue is also gone. Now, only one issue left – NHAI Tranche II

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Chaitanya January 27, 2016 at 6:21 PM

Hudco Trance II??
As Hudco didnt raise full allowed amount in this tranche?

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Shiv Kukreja January 27, 2016 at 7:04 PM

Hi Chaitanya,
I think HUDCO does not require more funds to be raised through these bonds, that is why it did not come out with a higher issue size.

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Anuj January 27, 2016 at 8:32 PM

Hi Shiv

Is it not necessary that if they have raised money through private placement than they must raise corresponding portion through public issue? Otherwise what’s the purpose of having max 25-30 purpose through private placement?

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Shiv Kukreja January 28, 2016 at 12:28 AM

Hi Anuj,
If these companies find that they won’t be able to utilize the proceeds from these issuances, then they can partially surrender the allocated amount. But, your point is also correct, there is no point making 30% rule for raising money through private placement if they decide to surrender it. So, let’s see how HUDCO goes about it.

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Anuj January 29, 2016 at 6:33 PM

Thanks Shiv

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Janaki January 27, 2016 at 6:27 PM

How much allotment can we expect from HUDCO?

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Shiv Kukreja January 27, 2016 at 7:06 PM

Hi Janaki,
49-50% allotment is expected.

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Ikjot January 27, 2016 at 6:48 PM

Thanks for the info Shiv,
If I’m not wrong we are looking at 45% to 50% allotment in retail category, Is that correct?

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Shiv Kukreja January 27, 2016 at 7:06 PM

Thanks Ikjot!
Yes, approximately 49-50% allotment will be made.

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S.K. January 27, 2016 at 7:07 PM

Dear Mr. Shiv Kukreja,
Any possibility of emailing the entire conversation thread, so that matter is clearly understood. Currently, comments/responses land up and it becomes difficult to pick up the thread & understand the issue under discussion. You may recall that you had enthusiastically responded earlier to try to implement this.
Further, to complicate matters some comments/responses seem to be not arriving in our email inbox.

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Shiv Kukreja January 27, 2016 at 7:24 PM

Hi S.K.,
We are looking into this matter, but we cannot commit you any favourable outcome. Certain things are beyond our control and making changes require time & proper planning before implementation. We would be more than glad to incorporate your requirements.

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sudhakara January 27, 2016 at 9:04 PM

Thanks, Shri. Shiv Kukreja, for the quick, relevant analysis and information.

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Shiv Kukreja January 28, 2016 at 12:30 AM

Thanks Sudhakara!

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Raju January 27, 2016 at 9:22 PM

Hy Shiv,

we can expect soon Nhai tranche 2 tax free bonds issue

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Shiv Kukreja January 28, 2016 at 12:32 AM

Hi Raju,
I hope NHAI launches it soon!

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SG January 27, 2016 at 11:20 PM

Dear Shiv,

By which date is allotment of HUDCO likely to be announced and units allocated to Demat account. Also by when is refund of balance funds likely to happen?

Thanks!

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Shiv Kukreja January 28, 2016 at 12:35 AM

Hi SG,
We can expect HUDCO refunds/allotment by 8th February.

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SG January 28, 2016 at 9:25 AM

Thanks so much for the information. Great work by you on the analysis and information. Pls keep it up!

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Shiv Kukreja January 29, 2016 at 1:11 AM

Thanks a lot for your kind words SG! 🙂

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Dr KR Sharma January 28, 2016 at 3:28 PM

Dear Shiv Kukreja,
Thanks a lot for your advice.Both George and you have enlightened me on my earlier blunders.I will apply in retail category only for the forthcoming NHAI TFB tranche issue and future TFB issues as well.

Reply

Shiv Kukreja January 29, 2016 at 1:12 AM

You are welcome Dr. Sharma!

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Shiv Kukreja January 29, 2016 at 1:10 AM

Day 2 (January 28) subscription figures:

Category I – Rs. 1,205.12 crore as against Rs. 342.30 crore reserved – 3.52 times
Category II – Rs. 2,470.65 crore as against Rs. 342.30 crore reserved – 7.22 times
Category III – Rs. 1,116.01 crore as against Rs. 342.30 crore reserved – 3.26 times
Category IV – Rs. 1,441.72 crore as against Rs. 684.60 crore reserved – 2.11 times
Total Subscription – Rs. 6,233.50 crore as against total issue size of Rs. 1,711.50 crore – 3.64 times

The issue stands closed on January 28th.

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harinee January 29, 2016 at 9:38 AM

So we get 47 allotted for 100?

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Shiv Kukreja February 2, 2016 at 5:24 PM

Hi Harinee,
It should be around 49 bonds for every 100 applied for.

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Vinodsub January 30, 2016 at 6:58 AM

Thanks shiv for the continued updates here and creating a forum for a bunch of us to collaborate.

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Shiv Kukreja February 2, 2016 at 5:26 PM

Thanks Vinod! 🙂

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Vinodsub January 30, 2016 at 7:17 AM

Interest payout dates.
Here is a quick glance at interest payout dates during the year. If you are a TFB investor and want to manage interest cash flow.

HUDCO only one floating expect 10th Feb
NHAI 1st April
IRFC 15th October
REC 1st December

Shiv can add additional inputs and comments.

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Chaitanya February 1, 2016 at 11:24 PM

Shiv, When TFBs are not there, write about something else 🙂

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Shiv Kukreja February 2, 2016 at 5:29 PM

Sure Chaitanya, I’ll do that. 🙂

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harinee February 5, 2016 at 10:36 AM

I second that. Manshu has disappeared and Your posts appear only for TFBs. I know it takes time and effort but really love your posts.

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PS February 2, 2016 at 3:50 AM

Hi Shiv,

Any idea if there are any other TFBs lined up?

Thanks a lot for the great post!

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Shiv Kukreja February 2, 2016 at 5:31 PM

Thanks PS!
NHAI Tranche II would be the next one to get launched, but don’t know when.

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PS February 2, 2016 at 11:16 PM

Thanks for the update!

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Vin February 2, 2016 at 6:29 PM

Read in today’ s Financial Express that the Govt is likely to allott Rs 5,000 crores of TFBs surrendered by NHAI to NABARD in the current FY. If this happens, it would be another opportunity to invest it TFB’s

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Shiv Kukreja February 2, 2016 at 6:38 PM
pradeep February 7, 2016 at 8:54 PM

Hello sir,
If the issue does come 3,500 crore may be the issue size. Can we expect 60-70% allotment. Any idea on the company’s rating?

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praveen February 4, 2016 at 8:00 PM

Dear Shiv,

When we say First Come First Basis, is it at calculated per day?
Basically do all retail participants who successfully bid on first day (Jan 27th) irrespective of time of the day get same percentage allocated to them?

Or people who bid on 27th morning get higher allocation percentage compared to people who bid after lunch of the same day 27th?

Regards
Praveen

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Pankaj February 4, 2016 at 8:28 PM

It is calculated per day.

All people who subscribed on 27th will get same percentage,

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praveen February 5, 2016 at 11:30 AM

Pankaj,

Thanks for the clarification.
Can you throw more light in context of below comment?
What will be the percentage allotment for people who subscribed on 1st and 2nd day respectively?
Is it 49 per 100 for both of them or only for those who bid successfully on 1st day?

Shiv Kukreja February 2, 2016 at 5:24 PM
Hi Harinee,
It should be around 49 bonds for every 100 applied for.

Regards
Praveen

Reply

Shiv Kukreja February 5, 2016 at 12:29 PM

Hi Praveen,
Applications submitted on 27th will be allotted around 49% bonds. No allotment will be made against applications submitted on 28th.

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praveen February 5, 2016 at 2:10 PM

Dear Shiv,

Thanks for clarification.
When does the money for un-alloted bonds get refunded back?

Regards
PRaveen

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Shiv Kukreja February 5, 2016 at 4:36 PM

Hi Praveen,
Refunds are expected by Monday.

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Shiv Kukreja February 5, 2016 at 12:30 PM

Thanks Pankaj!

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Pankaj February 5, 2016 at 1:10 PM

Since Issue got oversubscribed on first day only. So those who applied on 2nd day will not get any bond. Full money will be refunded.
Dear Shiv – Hope Iam right.

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Shiv Kukreja February 5, 2016 at 4:32 PM

That is right Pankaj!

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Pankaj February 6, 2016 at 1:22 PM

Bonds have been alloted. My blocked amount in ASBA has been removed and 50% amount debited.

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praveen February 6, 2016 at 4:01 PM

Thanks Pankaj for the update.

Would you mind clarifying how this ASBA work?
I think SBI provides ASBA facility by default for savings account holders without need to open any investment account while ICICI customers need to open seperate ICICI Direct account .

Does the bank while blocking money through ASBA provide an option to specifcy which bonds to buy,category, amount etc?
Will banks then pass the application form/bidding details to the manager of Tax Free Bonds?

Can you enlighten us with info on this whole process involved?

Regards
Praveen

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Pankaj February 6, 2016 at 4:14 PM

I also do not have much info on this. Iam using HDFC securities account and there in IPO section, when I place order, it gives option ASBA or not ASBA. So that way it is easy there. On choosing ASBA and then completing the procedure in HDFCsec.com page, amount is blocked in my HDFC account. On allotment, amount of bonds alloted is debited from account and rest amount is unblocked (which happened today).
Yes hdfc securities must be passing the application form/bidding details to the manager of Tax Free Bonds?
Hope it helps you.

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Shiv Kukreja February 6, 2016 at 6:01 PM

Hi Praveen,
Banks do provide the option to specifcy the category, series and amount to invest in these bonds. However, it is not necessary to have a demat account with the bank to avail the ASBA facility. After you submit your ASBA application, banks further upload your application details in the web based bidding system of the exchange(s). However, I think ASBA is a good system for IPOs, not so great for these tax-free bonds.

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Shiv Kukreja February 6, 2016 at 5:16 PM

Thanks Pankaj for sharing this info!

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pradeep February 7, 2016 at 8:58 PM

Why do people invest on 2nd day. Are they not aware that the issue is oversubscribed ? Or is it because of 5% interest ? 🙂

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Shiv Kukreja February 8, 2016 at 11:47 PM

Hi Pradeep,
It is primarily because of unawareness and sometimes it is due to a delay in processing of applications by the intermediaries.

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Biswajit February 5, 2016 at 1:48 PM

This is gives me more essential information to me I Often following this site. Thank you.. On HUDCO 7.64% Tax-Free Bonds – Tranche I – January 2016 Issue

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Shiv Kukreja February 8, 2016 at 11:47 PM

Thanks Biswajit!

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Pankaj February 5, 2016 at 8:12 PM

An out of context question , if any of the bloggers can advise and also excuse for this.
Iam planning to buy NPS online via http://www.enps.nsdl.com.
Link https://enps.nsdl.com/eNPS/LandingPage.html
Has anybody tried this route ? It is a new thing.
It says that KYC will be done by my bank in which I hold account. Will I have to physically go to bank or my bank will just look into my account and do the needful.
Thanks for your views in advance.

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pradeep February 6, 2016 at 8:09 PM

I am an existing account holder.I have invested through this route. It works fine and also you save contribution charges paid to POP. Are you existing NPS holder ?

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Pankaj February 6, 2016 at 8:44 PM

Thanks Pradeep. Iam not a NPS holder yet.

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Bobby February 5, 2016 at 8:24 PM

Shiv – Any idea about the TFBs planned/approved for next fiscal? If no info right now, then what is the right time to check with you?

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Shiv Kukreja February 8, 2016 at 11:51 PM

Hi Bobby,
Any such decision to allow such bond issuances will be taken by the FM in his Budget speech on February 29th. So, you can check it here on March 1st.

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S.K. February 6, 2016 at 9:48 PM

Mr. Shiv or other readers/contributors may kindly respond through this forum,

Could I kindly request you for a step-by-step guide on how to invest in RGESS, since it is very complicated?
Can we simply buy any of the designated CNX100 scrips worth 50,000 in our Demat A/c? How do we get certificate/approval for tax saving?

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Shiv Kukreja February 8, 2016 at 11:54 PM

Hi S.K.,
Here is one of our posts on RGESS, I hope it helps to an extent – http://www.onemint.com/2012/10/17/details-on-the-rajiv-gandhi-equity-savings-scheme/

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Vin February 7, 2016 at 8:43 PM

This refers to Sanjay’s post of 27 January about charges to be paid when one buys bonds from secondary market. Besides brokerage one has to pay ST+SC on brokerage, transaction charge, ST+SC on transaction charge and stamp duty . This is what I have been paying when I purchased tax free bonds from NSE. A few days back I purchased 3 bonds of IREDA from BSE. This time I was charged in addition to the above charges, Rs 15 as other charges- in other words it added Rs 5 to the cost of each bond I purchased. Is it because the total amount of transaction was small, only about Rs 3030 or is it something else? I will be grateful if anybody could explain.

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Bhaskar February 7, 2016 at 9:25 PM

Better to buy tax free bonds from zerodha account since now they are charging zero brokerage if you take delivery. Other charges are fixed and will be the same across brokerages. STT is not applicable for tax free bonds.

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S.K. February 8, 2016 at 5:47 PM

Dwar Vin,
Can you share which brokerage you are using? Charges seem reasonable as compared to ICICI whose charges are expensive especially in case of TFB’s where it can go upto minimum Rs 12-14 each. Other readers too can possibly share their own experiences in this forum, in this regards.

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Raju February 8, 2016 at 8:07 PM

when am buying TFB at secondary market approx 3Rs per bond including brokerage and all taxes charging at Zen securities

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pradeep February 7, 2016 at 9:14 PM

Hello Sir Shiv Kukreja ,
Thanks for your wonderful work on TFBs. Please continue the good work.
I have a question. You have calculated effective yield for various tax brackets. How is effective yield more that the interest rate?
Thanks again

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Vin February 7, 2016 at 10:10 PM

Thanks, Bhaskar!

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Vin February 8, 2016 at 9:19 AM

Shiv, you were spot on when you wrote that we should get our allotment and refund on 8.2.16. I have just now received my refund, 50% plus a little more. No information about allotment – maybe 49 or 50%. Thanks for your valuable inputs.

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Shiv Kukreja February 8, 2016 at 11:57 PM

That’s great Vin! Allotments have been made now, I hope you have received the intimation regarding that!

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Dr KR Sharma February 8, 2016 at 1:13 PM

Yes Vin,Shiv has made a perfect prediction.In the HNI category,I have been refunded over two-thirds of my bid amount though I bid on the first day of the HUDCO TFB issue.Is there any update about expected date of NABARD TFB issue?

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George February 8, 2016 at 4:39 PM

Why don’t you buy within retail limits the TFB already issued rather than waiting for applying under HNI for new issues unless the Retail limit is too small an amount for you.

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Shiv Kukreja February 9, 2016 at 12:00 AM

Hi Dr. Sharma,
There is no info on NABARD issue at present. I’ll update you about it as soon as I get any info.

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VikasG February 8, 2016 at 1:32 PM

Hi Shiv,

Any new tax-free bond issues coming out this financial year?

Thanks.

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Shiv Kukreja February 9, 2016 at 12:02 AM

Hi Vikas,
We are expecting NHAI Tranche II, HUDCO Tranche II and NABARD issues in the remaining few weeks of FY 2015-16.

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VikasG February 9, 2016 at 7:31 AM

Thanks for all you are doing, Shiv.

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Shiv Kukreja February 9, 2016 at 11:33 AM

Thanks Vikas!

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Bobby February 9, 2016 at 12:26 PM

Thanks Shiv for the immensely valuable info you’ve been sharing.

On the future issues for FY15-16, do we have a high level sense of the coupon rate they’ll offer for 15 yr & 20yr period?

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Vin February 8, 2016 at 10:35 PM

While refund was received today, there is no news about the number of bonds being allotted/ credited in our Demat account. Has anybody received the bonds in his account.

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Bobby February 8, 2016 at 11:03 PM

Vin – I recd a SMS fom NSDL around 915pm IST today (08Feb) advising credit of bonds to my demat A/c. I’d applied in retail and received exact 50% of the applied quantity.

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Vin February 8, 2016 at 11:55 PM

Thanks, Bobby. After I saw your message, I checked my phone. I have also got the message now.

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Shiv Kukreja February 9, 2016 at 12:05 AM

Yes, bonds have been allotted now. I think these bonds should get listed on the BSE on Wednesday.

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Dr KR Sharma February 9, 2016 at 12:38 PM

Thanks a lot,Shiv.I am pleasantly surprised to know that three more TFB issues are in the pipeline.

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Shiv Kukreja February 9, 2016 at 7:01 PM

You are welcome Dr. Sharma!

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S.K. February 9, 2016 at 1:00 PM

Dear Mr. Shiv Kukreja,
In case of death of TF Bond holder, will the TFB’s be transferred to name of the Demat Nominee? What safeguards/protection is available in such cases?
Please elaborate.

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Shiv Kukreja February 9, 2016 at 7:07 PM

Yes S.K., in case of any such unfortunate event, all the demat holdings, including these bonds, will get transferred to the nominee/legal heir of the applicant. You just need to make sure that you have a nominee registered in your demat/trading account.

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Shiv Kukreja February 9, 2016 at 6:59 PM

HUDCO tax-free bonds will get listed on the BSE on February 10th i.e. Wednesday – http://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20160209-10

Here are the BSE codes for the same:

7.27% 10-year bonds – BSE Code – 935640
7.64% 15-year bonds – BSE Code – 935642

Deemed date of allotment has been fixed as February 8, 2016. Interest will be paid on February 8th every year.

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sudhakara February 9, 2016 at 7:25 PM

Thanks, SK, for all the updates promptly being posted by you.

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Shiv Kukreja February 9, 2016 at 7:47 PM

Thanks Sudhakara!

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Shiv Kukreja February 10, 2016 at 10:43 AM

HUDCO 7.64% 15-year bonds are currently trading at Rs. 1,006.39, a premium of 0.64% – http://www.bseindia.com/NewStockReach/StockReach_Debt.aspx?scripcode=935642

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Bobby February 10, 2016 at 3:01 PM

Thanks Shiv for the immensely valuable info you’ve been sharing.

On the future issues for FY15-16, do we have a high level sense of the coupon rate they’ll offer for 15 yr & 20yr period?

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Shiv Kukreja February 11, 2016 at 12:43 AM

Thanks Bobby!
Tracking the current G-Sec yield, forthcoming tax-free bonds would offer coupon rates in this range only.

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sanjeev maheshwari February 11, 2016 at 2:19 PM

Dear Mr. Shiv, I am a first timer on this platform. See some very interesting posts. Congrats. I had applied for 100 HUDCO 7.64%TFB on line. Got confirmation of allotment of only 50 bonds through an SMS from CDSL on8th feb. 2016 itself, but no word on refund of unused Rs50000 yet. Bank a/c as well as liened amount has not got this Rs50000 credit back automatically. By what date one may expect it back? Pl. advise. Thanks Sanjeev Maheshwari

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George February 12, 2016 at 3:06 AM

One doubt I think which I think was discussed long back. A and B have a Demat ac 1 with A as first holder. B and A have another Demat account 2 with B as first holder. Can demat account 1 and 2 have retail investment of 10L each which means 1 and 2 together can invest upto 20 L. Or is it that they can hold only 10 L for retail category.

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Bobby February 12, 2016 at 10:18 AM

George – I’ve accounts with exactly same structure with my dad. I’m holding 10L for one TFB in A a/c and 2L in B a/c. I’m getting the interest for retail cat in both a/cs – meaning no downward adjustment in interest rate – even if combined holding is 12L. Presuming the TFB issuer has all checks and balances in place and those are wrkng, it shd be possible to hold 10L each in both a/cs.

Even in normal bank a/cs (with joint holding), the interest earned is always tagged to the 1st holder. Likewise for all financial transactions or holdings (including TFBs), first name principle shd apply.

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Shiv Kukreja February 12, 2016 at 12:02 PM

Yes, that’s right George! Thanks Bobby!

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George February 12, 2016 at 12:40 PM

Thanks Bobby. That was my understanding also. Some doubt came and I wanted to be sure before I execute new purchases. Hope Shiv also feels the same.

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Shiv Kukreja February 12, 2016 at 1:58 PM

With you George, always !! 🙂

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nitesh patel February 14, 2016 at 6:16 PM

according to beaware money nabard taxfree bonds are opening on 16th March is this true and what will be accepted coupan rate 2016

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Shiv Kukreja February 15, 2016 at 2:03 AM

Hi Nitesh,
Can you please share the link/source?

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Shiv Kukreja February 15, 2016 at 1:54 AM

IRFC will raise an additional Rs. 3,500 crore by issuing tax-free bonds this financial year – http://www.financialexpress.com/article/economy/indian-railway-finance-corporation-gets-rs-3500-crore-more-tax-free-bond-limit/211014/

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Pankaj February 15, 2016 at 8:16 AM

Dear Shiv, Refer mail from Mr Nitish,
Link is
http://www.bemoneyaware.com/tax-free-bonds-of-fy-2015-16-ay-2016-17/
Forthcoming Tax Free Issues-Tentative:
NHAI-3300cr/22-2-16,
IRFC-2450cr/29-2-16,
HUDCO-2000cr/29-2-16
NABARD-3500cr(Mar-16)

How true it is -is open for blog.

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Chaitanya February 16, 2016 at 9:29 PM

Shiv, Let us know if you were able to validate if this is right..

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Shiv Kukreja February 23, 2016 at 11:13 AM

Thanks Pankaj for this info! I am not sure about the exact dates, so cannot really comment on that. But, issue sizes should be around these figures only. HUDCO issue should be of lower value though as 30% of the allocated amount has to be through private placements.

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Ashish Sarkar February 18, 2016 at 3:48 AM

Shiv, Just wanted your opinion on an issue: Can a NRI buy some of the Tax Free bonds in secondary market which were earlier disallowed in the primary issuance by the issuer like NHPC or IIFCL bonds in 2013. also will be it allowed if they are held in NRO dmat account, which are non repatriable. would appreciate your expert views,

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Shiv Kukreja February 23, 2016 at 1:57 PM

Hi Ashish,
NRIs can invest in tax-free bonds, but only those in which it is allowed. You need to check it with your broker which companies have allowed NRIs to make investments.

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Nagarajan February 19, 2016 at 8:21 PM

Hi Shiv,

I received Hardcopy Hudco bonds but applicant name showing as Nominee, how and who can i approach to correct this?. Is it going to be problem later?.

Appreciate your kind advice on this..

Regards
Nagarajan

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Shiv Kukreja February 23, 2016 at 2:00 PM

Hi Nagarajan,
You need to contact Karvy Computershare on 1800 3454 001 to get it corrected.

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Nagarajan February 23, 2016 at 8:14 PM

Thanks lot Shiv,

I have contacted them and they have requested me to drop email about this.
Karvy Email ID : einward.ris@karvy.com

may be useful for others.

Regards
Nagarajan

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Shiv Kukreja February 24, 2016 at 12:37 AM

Thanks Nagarajan!

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Vin February 21, 2016 at 8:31 PM

I also heard today that NHAI issue is opening on 22 Feb.

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Shiv Kukreja February 22, 2016 at 5:08 PM

NHAI Tranche II update:
Issue opens – 24th February, 2016
Issue closes – 1st March, 2016
Total Issue Size – Rs. 3,300 crore, including Green-Shoe Option to retain Rs. 2,800 crore
Interest Rates for Retail Individual Investors investing upto Rs. 10 lacs:
10 years – 7.29% p.a.
15 years – 7.69% p.a.

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praveen February 24, 2016 at 7:33 PM

Hi,

http://economictimes.indiatimes.com/markets/stocks/news/nhai-tax-free-bonds-oversubscribed-2-75-times-all-categories-see-heavy-demand/articleshow/51124925.cms

Looks like NHAI got over subscribed by 2.75 times

Based on details available on BSE page, retail sector subscription is only 1299 crores approximately as below:
Series4 1,29,93,881

While alloting the bonds when it has been over subscribed will they follow limits set for each category..
For eg, if category 4 has been reserved 40% will they allot based on 40% of 3300 crores which is equal to 1320 crores and hence all the retail investors who invested on first day gets their bonds they applied for?

Regards
Praveen

Reply

Shiv Kukreja February 24, 2016 at 8:05 PM

Hi Praveen,
Yes, retail investors will be allocated these bonds based on their reserved quota of Rs. 1,320 crore. But, the retail category is oversubscribed by 1.15 times i.e. Rs. 1523.36 crore as against Rs. 1,320 crore reserved. Please check this link – http://www.bseindia.com/markets/publicIssues/EODCumlativeShedule.aspx?ID=1067

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praveen February 24, 2016 at 8:19 PM

Thanks Shiv for the info.
What is the difference between “Cumulative Bid Details” and “Cumulative Demand Schedule”?

REgards
Praveen

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Shiv Kukreja February 24, 2016 at 9:31 PM

Cumulative Bid Details carries ‘Series’ wise bid details, whereas Cumulative Demand Schedule has ‘Category’ wise break up.

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praveen February 24, 2016 at 10:22 PM

Thanks Shiv.

How easy is it to sell these Tax Free Bonds?
Are there buyers if we want to sell them at a later date if need arises?
And what is the tax treatment for the sale proceeds and also the past interest credited in earlier years?

At present my TFB is being credited into my DP account associated with India bulls. So if I want to sell should I transfer it to another demat account and then use zerodah or icici securities to sell them?

Thanks in advance
Praveen

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Shiv Kukreja February 25, 2016 at 7:09 PM

Hi Praveen,
If sold after holding for more than 1 year, LTCG tax is payable @ 10% flat. If sold before completion of 1 year, STCG tax is payable as per you slab rate. Please check the ‘Turnover’ column in this link – https://www1.nseindia.com/live_market/dynaContent/live_watch/equities_stock_watch.htm?cat=SEC

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praveen February 27, 2016 at 9:54 PM

Thanks Shiv for the links. It helps.

Can you clarify below as well:

At present my TFB is being credited into my DP account associated with India bulls. So if I want to sell should I transfer it to another demat account and then use zerodah or icici securities to sell them?

Regards,
Praveen

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Shiv Kukreja February 28, 2016 at 5:32 PM

Hi Praveen,
I didn’t get your your query. Why do you want to transfer it to some other demat account?

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praveen February 29, 2016 at 11:09 AM

Hi Shiv,

Now I have a trading account with India bulls which provided a Demat account associated with trading account.

I was told that I cannot trade say using Zerodah from demat account associated with India bulls demat account where my TFBs are parked.

Basically Indiabulls trading and demat account are tightly coupled.

Is this assumption incorrect?
Please let me know.

Regards
Praveen

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Shiv Kukreja March 1, 2016 at 10:21 PM

Hi Praveen,
You can use your Zerodha account to sell your bonds, but you need to contact Zerodha to know the exact procedure.

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Dr KR Sharma February 25, 2016 at 3:46 PM

Shiv and George,I have followed your advice of investing in retail investor category with regard to NHAI TFB issue today on February 25,2016.Is there any chance of securing allotment as I have invested on the second day of this issue since I missed internet out of station for a few days until today afternoon?

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praveen February 25, 2016 at 5:15 PM

Hi,

NHAI got subscribed on the first day itself.
So I think if you applied on 2nd day you would not get it.

Regards
Praveen

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Shiv Kukreja February 26, 2016 at 12:53 PM

HUDCO Tranche II update:
Issue opens – 2nd March, 2016
Issue closes – 10th March, 2016
Total Issue Size – Rs. 1,788.50 crore, including Green-Shoe Option to retain Rs. 1,288.50 crore
Interest Rates for Retail Individual Investors investing upto Rs. 10 lacs:
10 years – 7.29% p.a.
15 years – 7.69% p.a.

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Dr KR Sharma February 28, 2016 at 4:58 PM

Dear Praveen,
Thanks for your response.In the HUDCO TFB issue,I think that those who applied on the second day were also allocated.Hence,I am crossing my fingers on the NHAI tranche II TFB retail issue though I applied on the second day.Shiv and George,what is your speculation or update on this?

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Shiv Kukreja February 28, 2016 at 5:38 PM

Hi Dr. Sharma,
I don’t know how you got the bonds allotted in the HUDCO issue when you applied for it on the 2nd day, but I don’t think you would get the NHAI bonds allotted.

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Dr KR Sharma February 29, 2016 at 12:02 AM

Dear Shiv,
I applied for the HUDCO TFB issue on the first day only and was hence allocated the same.But I only heard that the HUDCO TFB issue was allocated even for the second day applicants.Now you have confirmed that what I have heard is false.

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Mahesh March 1, 2016 at 2:46 PM

If it is not fully subscribed on First day, one gets full allotment if applied on First day and gets proportionate allotment on second or subsequent days for the balance amount of issue size. So, others might have got some allotment on second day also and may get it till last day if not fully subscribed. The proportion depends on date of upload of application.
One can monitor this status.

Shiv, is this correct?

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Shiv Kukreja March 1, 2016 at 10:00 PM

That is correct Mahesh.

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Mahesh March 1, 2016 at 2:54 PM

Shiv,
You wrote in your post that interest payment on HUDCO will be on anniversary which is likey to be March every year, but the prospectus states First interest on 15-Dec-2016 and subsequent on 15 Dec every year and last on date of maturity from 15-Dec- to date of maturity.
Can you please clarify.
Thanks

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Shiv Kukreja March 1, 2016 at 10:02 PM

Hi Mahesh,
I made the required changes in my post yesterday itself, please check – http://www.onemint.com/2016/02/27/hudco-7-69-tax-free-bonds-tranche-ii-march-2016-issue/

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Mahesh March 2, 2016 at 12:34 PM

Thanks Shiv.
It is amazing that you attend to all comments with a very positive attitude. I sometime wonder where do you get all energy and time from.
Thanks for your constant support. Please accept my sincere compliments.

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Shiv Kukreja March 10, 2016 at 1:51 AM

Thanks Mahesh! Such encouraging and motivating compliments give me all the energy to work harder !! 🙂

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Shiv Kukreja March 5, 2016 at 12:10 PM

NABARD Tax-Free Bonds Issue Update:
Issue opens – 9th March, 2016, Issue closes – 16th March, 2016, Issue Size – Rs. 3,500 crore

Interest Rates for Retail Individual Investors investing upto Rs. 10 lacs:
10 years – 7.29% p.a.
15 years – 7.64% p.a.

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praveen March 9, 2016 at 7:37 PM

Hi,

Can someone let know the subscription status for NABARD in the retail segment?

Regards
Praveen

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Shiv Kukreja March 10, 2016 at 1:46 AM

Hi Praveen,
It has got subscribed by 0.74 times in the retail category i.e. Rs. 1,551.32 crore as compared to Rs. 2,100 crore reserved.

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praveen March 10, 2016 at 9:37 AM

Thanks Shiv for the info.

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Shiv Kukreja March 10, 2016 at 10:18 AM

You are welcome Praveen!

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Niveza India March 25, 2016 at 10:26 AM

Markets End on a flat note ahead of long weekend:
Markets recovered in late afternoon session today to close on a flat note. Sensex closed at 25,337 just 7 points up and Nifty closed at 7,716 only 1 point up.
Metal stocks such as Hindalco and Tata Steel were up in today’s trade. While PSU banks such PNB, Bank of Baroda were on the downside. Reliance also was on a downside.
In the morning trade session, there was profit booking seen and late afternoon session again saw a recovery.
Aviation stocks, Jet Airways, Indigo and Spicejet were on significant upside today. Indigo posted 10% gain today and again saw some profit booking and closed at 5-6% gain.
Till RBI policy meet now, markets are expected to remain in narrow range now.

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G V Joshi May 4, 2016 at 4:05 PM

Hi Shiv,

Would it possible for you to publish the interest payout dates for all the Tax free bonds issued in FY 15-16. It will be of great help.

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Niveza India May 18, 2016 at 5:52 PM

#stockmarkettips::
Merger of the State banks and its associates would be a good synergistic effect on SBI as a whole. All the banks books and treasuries would be merged together and thus it can save some cost of managing treasury accounts going ahead for the bank. Also size of the assets will increase significantly as a whole entity. SBI is already the largest bank and after this again it will be by far the largest bank of India. Once the NPA issue of the overall SBI and Associates are on place which will be in next 2-3 quarters it will start performing. Good time to invest in SBI at current levels and buy on any dips is good strategy for next 2-3 years time horizon.
Stock Market Tips

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