IRFC 7.64% Tax-Free Bonds – Tranche II – March 2016 Issue

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

2016 so far has seen a good amount of volatility in all the major financial markets in the world. The main cause of this volatility has been China. After having many years of high GDP growth, Chinese economy is taking a breather. How long this slowdown would last, it is something which only God can answer. In these uncertain times, risk averse investors want safety of their hard earned money and tax efficiency of their investments. Tax Free Bonds fulfil both of these requirements.

To satisfy our hunger for tax-free bonds, IRFC will join the company of NABARD from Thursday, March 10th. The issue will remain open for just 3 days to get closed on March 14. This is the shortest period of time a company has decided to keep its issue open even before it actually opens. It seems the merchant bankers are confident enough to get the required subscription numbers within a day or two, and we all know that they are right in their calculations.

Here are the salient features of IRFC Tranche II of Tax Free Bonds:

Size of the Issue – Indian Railways has been spending a huge amount on expanding its network and upgrading its existing infrastructure. IRFC is one of the sources through which Indian Railways gets its required funds for such high expenditure. IRFC has already raised Rs. 7,050 crore in the current financial year by issuing these tax-free bonds. To partly meet its funds requirements, IRFC will raise another Rs. 2,450 crore in this issue.

Rating of the Issue – CRISIL, ICRA and CARE have assigned ‘AAA’ rating to this issue and consider it to be the safest from timely payment of its debt obligations, including interest and principal investment. Moreover, these bonds are ‘Secured’ in nature and certain fixed assets of the company will be charged equivalent to the outstanding amount of the bonds.

Coupon Rates on Offer – IRFC is offering yearly interest rate of 7.29% for its 10-year option and 7.64% for the 15-year option to the retail investors investing less than or equal to Rs. 10 lakh. These rates exactly match the rates offered by NABARD in its issue which is getting launched today.

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For the non-retail investors, coupon rates will be lower by 25 basis points (or 0.25%) for the 10-year option at 7.04% and 29 basis points (or 0.29%) for the 15-year option at 7.35%.

NRI/FPI/QFI Investment Allowed – This issue will try to quench the thirst of some Non-Resident Indians (NRIs), Foreign Portfolio Investors (FPIs) and Qualified Foreign Investors (QFIs) as they have been allowed to invest in this issue either on a repatriation basis or a non-repatriation basis.

Investor Categories & Allocation Ratio – As compared to the earlier issues, this issue has a higher percentage allocation of 60% for the retail investors and as compared to the NABARD issue, a slightly higher percentage allocation of 15% for the high networth investors.

As always, 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 is reserved i.e. Rs. 245 crore

Category II – Non-Institutional Investors (NIIs) – 15% of the issue is reserved i.e. Rs. 367.50 crore

Category III – High Net Worth Individuals including HUFs – 15% of the issue is reserved i.e. Rs. 367.50 crore

Category IV – Resident Indian Individuals including HUFs – 60% of the issue is reserved i.e. Rs. 1,470 crore

Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first come first served (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 – IRFC has decided to get these bonds listed on both the stock exchanges i.e. on the National Stock Exchange (NSE) as well as on the Bombay Stock Exchange (BSE). The bonds will get allotted and listed within 12 working days from the closing date of the issue.

Demat Account 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 form also. Whether you apply for these bonds in demat or physical form, the interest payment will still get credited to your bank account through ECS.

Also, even if you get these bonds allotted in an electronic form and sometime in future you decide to close your demat account, you will have the option to get them rematerialized in physical/certificate form.

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 NSE and BSE.

Interest on Application Money & Refund – Successful allottees will earn interest at the applicable coupon rates on their application money, from the date of realization of application money up to one day prior to the deemed 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 – IRFC will make its first interest payment on October 15 this year. Subsequent interest payments will also be made on October 15 every year.

Should you invest in this issue?

For a large number of retail investors, tax-free bonds have remained their favourite investment option for all these years since they first got allowed to be issued in 2011-12. As the finance ministry has decided to end this channel of fund raising for all these big and reliable government companies in the infrastructure financing or development space, we all have been very disappointed.

But, there is nothing we can do about it. The only thing we can do is to utilise these last couple of opportunities to subscribe to these bonds and just hope for the government to reintroduce these bonds again in the next year’s budget. Till then, risk-averse investors should subscribe to these bonds and other investors should invest their money in good mutual funds for infrastructure development to gather pace through a different funding channel.

Application Form for IRFC & NABARD Tax Free Bonds – Resident Indians and NRIs

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 or NABARD tax-free bonds, you can contact/whatsapp me at +919811797407 or mail me at skukreja@investitude.co.in

333 thoughts on “IRFC 7.64% Tax-Free Bonds – Tranche II – March 2016 Issue

  1. Hi Shiv, thanks for the article. Any idea about NHAI refunds. Want to use it for IRFC. Also, any expected allocation. Suppose if i apply for 3 lacs. Expected lot that i get in retail category.
    TIA

    1. Hi Vinit,
      NHAI refund process has started, you’ll get soon get your refund amount credited in your bank account. You can expect allotment of around 88% i.e. Rs. 2,64,000 or 264 bonds of Rs. 1,000 each.

      1. Thanks for the response Shiv, one more thing please. If i don’t get the refund of NHAI by tomorrow, then i will be applying for IRFC for whatever amount i have as of now. Is it possible to again submit the request for some more amount on 11th?

        1. Hi Vinit,
          That is something you need to check with your broker. I think broking companies do not allow online submission of multiple applications. However, you can submit multiple applications in physical form.

  2. Looking at the subscription figures and the rate at which retail category in NABARD spiked after 4pm i.e. after refunds, looks like the retail category of Rs. 1,470 crores in IRFC might take place with a 60-65 % allotment.
    Any thoughts Shiv…

    1. Hi Ashish,
      I don’t think IRFC issue will have such a high subscription to have only 60-65% allotment. I think it should fall in the range of Rs. 1,200 crore to Rs. 1,600 crore. So, 90-100% allotment for the retail investors who apply for it on the first day.

      1. would be highly elated with such high allotment % ….
        One request , Can u make a post on all the TFB issued in FY 2015-16 w.r.t. the date of allotment and their payment of interest dates, the way you made for the previous yrs..
        Also i would like to thank you from the bottom of my heart for sharing such an invaluable source of knowledge of financial tips for many readers like us and responding to each and every comment with due dedication and devotion. May this blog grow by leap and bounds….

      2. would be highly elated with such high allotment % ….
        One request , Can u make a post on all the TFB’s issued in FY 2015-16 w.r.t. the date of allotment and their payment of interest dates, the way you made for the previous yrs..
        Also i would like to thank you from the bottom of my heart for parting such an invaluable source of knowledge of financial tips for many readers like us and responding to each and every comment with due dedication and devotion. May this blog grow by leap and bounds….

  3. Hi Shiv, what’s the expected allocation for application on day 1 for IRFC on 10th March?

    Can one expect 100% allocation?

      1. Yes Shiv. I also feel chances of 80-100% considering that a portion of Nabard still to be subscribed. Once again Big Thanks to you for this forum which focusses on TFB so much and your analysis on each issue. Most of the time you was spot on.Not sure when we can expect another TFB season.

        1. Thank you Mr.Shiv Kukreja. Have been following your forum since 2013. Helped me during my retirement. Appreciate your contribution

  4. Hi Shiv,
    Appreciate for sharing this detailed article and prompt responses. If I miss this golden opportunity in investing these tax free bonds (as I have missed earlier and just applied for NABARD yesterday), are there any chances in investing in the same after they have been listed in NSE/BSE thru my demat account (without worrying about these deadlines). If so will that investment still better than a current highest paid bank FD of around 8% for individuals who are in 30% tax bracket. Please respond. Thanks.

    1. Hi Shankar,
      Yes, it is definitely possible to buy/sell these bonds in the secondary markets. These bonds are way superior to the fixed deposits, post office schemes (except PPF) from tax efficiency point of view for the investors in the 30% tax bracket.

  5. would be highly elated with such high allotment % ….
    One request , Can u make a post on all the TFB issued in FY 2015-16 w.r.t. the date of allotment and their payment of interest dates, the way you made for the previous yrs..
    Also i would like to thank you from the bottom of my heart for sharing such an invaluable source of knowledge of financial tips for many readers like us and responding to each and every comment with due dedication and devotion. May this blog grow by leap and bounds….

  6. Dear Shiv Kukreja ji,
    Thank you for valuable guidence.
    Always on Time Updates.
    Tax Free Bond investments helps in my retirement.
    I Appreciate your cooperation.
    God Bless You.

  7. Hi Shiv
    Any idea what has been the retail subscription rate for NABARD on day 1 ?

    Can we expect 100% allotment if we have invested on day 1 ?

    Regards
    Girish

    1. This is a complete non-sense. They write articles and sensationalise it without having knowledge about it. Issue is of Rs. 2,450 crore and they are saying it got oversubscribed within an hour considering the base issue size of Rs. 500 crore only. Half knowledge is dangerous most of the times.

        1. correction… 84 is based on issue size of 500 crores…

          so numbers are not very good…or really good if you want 100% allocation

  8. Surprise! IRFC retail portion is already oversubscribed 1.34 times at 1 pm today and NABARD issue is still not fully subscribed.

        1. I think their base is 500 crores. Hence 60% of it is 300 crores. Anyway it does not match with 60% of 2450 crores which is 1470 crores.

  9. What is the correct issue size of IRFC 2450 crores or 5000 crores? Earlier post says 2450 crores, whereas bse link shows total of 5000 crores.

  10. How come IRFC has got much more subscription as compared to NABARD ?
    Is it due to IRFC going to be listed on NSE as well or is there some other reason for this difference ?

  11. The mystery behind the two numbers of issue size 500 crores & 2450 crores is
    “Rs 50,000 lakhs with an option to retain oversubscription upto Rs 1,95,000 lakhs aggregating upto Rs 2,45,000 lakhs”
    So till the day retail subscription reaches 1470 crores (60% of 2450), one can expect full allotment. So far it has reached 669 crores at 3:15 pm.

      1. No sir,
        As per my calculation allotment should be around 28 to 29 %.Because it is oversubscribed by 3.46 times.It means 100/3.46=28.90.Per 1 lakh application one should get 28,000/-.Waiting for ur clarification…

        Thanks
        Firoz

  12. Day 1 (March 10) subscription figures:

    Category I – Rs. 3,992 crore as against Rs. 245 crore reserved – 16.29 times
    Category II – Rs. 3,129.40 crore as against Rs. 367.50 crore reserved – 8.52 times
    Category III – Rs. 1,271.80 crore as against Rs. 367.50 crore reserved – 3.46 times
    Category IV – Rs. 1,059.28 crore as against Rs. 1,470 crore reserved – 0.72 times
    Total Subscription – Rs. 9,452.48 crore as against total issue size of Rs. 2,450 crore – 3.86 times

    1. Shiv, … any guesstimate you can make of getting higher / better allocation in Retail Categ Application to be made on March-11 … between IRFC (on 2nd Day) and NABARD (on 3rd day) for same amount of application say Rs 1 Lac ??

  13. Hi Shiv, Since it is 0.72 subscription in Retail category, can those of us who applied in Day 1 get Full allotment. Kindly clarify

      1. Hi Shiv, I missed applying for these bonds on day 1. How much allotment can I expect if I apply on day 2? I am trying to compare the cost of “AIR reporting” vs allotment. If I am going to to apply for 5L and only get 50K worth of bonds, then maybe the AIR report is not worth it. It might lead to a scrutiny :-(. I have applied to several bonds this year.

  14. If Qualified Institutional Bidders (QIBs) oversubscribe their portion to such an extent, what is the sole purpose of investment if one gets allocation in tune of mere 4.6% in PFC OCT15 and now 6.14% in IRFC MAR16? It baffles me that they ready to lock their funds of around 95% only to get them back !!!

    1. Hi Aashish,
      QIBs need to invest their money in good quality instruments. These bond issues are one of them. So, probably they don’t mind blocking money for a short duration.

  15. Thank you Shiv for the regular updates in TFB…Helped me a lot as a new comer…Sorry I could not catch up with you earlier….I missed a lot…But better late than never!!!
    Thanks once again..Keep the good work.

  16. I am a retail investor. If I purchase this bonds from retail investor through secondary market, should I get interest of retail category viz.7.64% ?

      1. Dear Mr. Shiv,
        By indicating in your above comment: ‘no step-down clause in these Bonds’, do you mean that retail investors can buy more than 10L worth of thus particular issue of IRFC Tranche-2 TFBs & still get the higher rate of 7.69%?
        Please clarify.

        1. No S.K., I did not mean that. With Step Down clause, even a retail investor buying from a retail investor would get a lower rate of interest. This clause was put in place some time back to encourage retail investors to hold on to their bonds and discourage trading in these bonds.

          1. Mr. Shiv, can you please share the names of such issues & the year in which this strange rule was enforced. That means unsuspecting Investors who purchase such Bonds will be at a considerable loss since they will get less than the displayed Coupon Rate. Are their market prices lower & yields higher than others in comparison?

      1. is it per Issue or total .
        If i have purchased more than 15 lakh TFB this year then whether is it reported provided total allotment is 2 lakh per TFB issue

        1. I wished I knew about the 5L limit. I should have applied for 499 bonds instead of 500 bonds :-(. I made several TFB applications this year most of which would be reported in AIR :-(. I feel having too many AIR transactions can lead to scrutiny.

          1. Just for clarification: I am not hiding anything. I even report 100 Rs interest if I got it in some savings account.

            I got scrutiny few years back. I spent *so* many weekends annotating my bank statements, preparing CG sheets, computation of income statement … – such a colossal waste of my time. I am not afraid of scrutiny. Just the paperwork involved in it in replying to it. IT dept is lazy. They make us do all the work. I don’t remember where I read but most of the scrutiny cases for middle class folks hardly recovers much tax for IT dept.

  17. I applied in icicidirect today. Can i apply again using the kotak netbanking ASBA facility by proving details of Icici demat account. Will it be rejected citing duplicate appln?

    Another question is can i apply using multiple DPs ie., one appln using icicidirect NSDL and another Angel broking CSDL on the second day

    1. This is not true. Multiple applications are accepted for same PAN. There is no restriction that there should be only one application per PAN

  18. Shiv, Thnks for all the prompt responses to such a variety of queries …
    In the last 2 0r 3 TFB series some comments are targeted w.r.t “A.I.R reporting”.
    what is that? and does one have to file any return on the same …
    also what is the bank’s role in AIR?
    can u make a detailed post later sometime in april (since it is March, u must be a hell lot busier) to elaborate the same
    Thanks again…

    1. AIR
      Annual Information Return (AIR) of ‘high value financial transactions’ is required to be furnished under section 285BA of the Income-tax Act, 1961 by ‘specified persons’ in respect of ‘specified transactions’ registered or recorded by them during the financial year. The due date of filing of the return is the 31st of August of the following year. The ‘specified persons’ and the ‘specified transactions’ are listed in Rule 114E of the Income-tax Rules, 1962.

      1. you can run ..but you cannot hide. AIR includes Interest on Fixed Deposits, Credit Card transactions etc, Dividends paid by mutual funds etc.

        The IT then correlates this with your returns using PAN #. If a person has declared a Rs 10 lakh income and investing 2-3 lakhs, the person should be worried. Even if AIR for investment reporting does not catch the transaction this year, maybe interest receipts/cumulative interest receipts eventually will. And if your reported income is commensurate with the investment, 99.9% questions will not be asked.

        Pay the devil his due and you know what belongs to you.

        1. ” And if your reported income is commensurate with the investment, 99.9% questions will not be asked.”
          Absolutely spot on !!!
          Since everyone is commenting on AIR reports on the previous TFB’s that I had not heard of before, I wanted some detailed info which Shirish help to certain extent,
          however a complete post (by Shiv) on the variety of investments with examples as per current rules and regulations would be welcome and would paint a proper picture since many of us may not be from a finance background…

      1. Shirish, this is a year 2011 article & possibly invalid. Perhaps a competant person like Mr. Shiv, could explain in detail in an easy to understand manner about AIR, its impact on Taxpayers & its resolution in filing ITRs.

    2. Hi Aashish,
      AIR reporting is something I’m not interested to cover as I think nobody who is clean should be afraid of it. I don’t even want to discuss it on any of my forums here. But, still if you want, I’ll do a post on the same in the first fortnight of April.

      1. Yes, Dear Shiv, all your readers will be extremely grateful for this write-up/article on INCOME TAX & AIR. Will be grateful if you can also post other helpful articles on Income Tax, on Filing of Returns, since many of us file our iwn returns online and at times we are not sure if we are doing it right.

  19. Dear Shiv,
    The comment i posted in the morning regarding “AIR Reports” has been shown as “Awaiting Moderation”. Kindly look into it plz.

  20. Dear shiv sir,
    I have already applied under catagory III & chances are 28%.Now still the retail catagory under subscribed. Can I apply under retail catagory on Monday?
    Thanks & Regards

    Firoz

      1. Dear Mr. Shiv,
        If a subscription order is executed already, how can one withdraw it? Such a option/facility & even the option/facility of subscribing through more than one IPO Application/order are not available with even ICICI Direct, which is a leading brokerage house. Your comments will be appreciated please as which service provider has all these options.

  21. Shiv – Thanks for sharing that for next fiscal Fin Min has clarified that the Infra Bonds would not be tax-free. Given your experience, what is your sense of the range of coupon rate and tenure that may be offered?

    Thanks Once again for the wonderful support you’ve always provided. It’s indeed a pleasure to know that genuine & sincere folks like you still exist 🙂

    1. Thanks a lot Bobby for your kind and encouraging words! It is these words that I am working for !! 🙂
      Moreover, I am not sure whether infrastructure bonds would be offered to the general public or not. I think if these bonds are not tax-free, then probably they will be issued to QIBs and Corporates only on a private placement basis.

    1. Firoz – It should be 12 business days from the issue closure date.

      Here’s a copy/paste from the prospectus –

      ‘In terms of Bonds issued in dematerialised form, our Company will take requisite steps to credit the demat accounts of all Bondholders who have applied for the Bonds in dematerialised form within 12 Working Days from the Tranche-II Issue Closing Date….’

      ‘…..the unutilised portion of the Application Amounts will be refunded to the Applicant within 12 (twelve) Working Days of the Issue Closing Date….’

      So you can do the refund date calcs basis the actual issue closing date – 14Mar or sooner 🙂

  22. Day 2 (March 11) subscription figures:

    Category I – Rs. 3,992 crore as against Rs. 245 crore reserved – 16.29 times
    Category II – Rs. 3,146.87 crore as against Rs. 367.50 crore reserved – 8.56 times
    Category III – Rs. 1,291.44 crore as against Rs. 367.50 crore reserved – 3.46 times
    Category IV – Rs. 1,265.64 crore as against Rs. 1,470 crore reserved – 0.86 times
    Total Subscription – Rs. 9,695.95 crore as against total issue size of Rs. 2,450 crore – 3.96 times

    1. HUDCO retail refunds are approx 700 crores. Any idea if they will be released on Monday.. since the reinvestment into irfc of even a part of refund will exhaust the balance of 184 cr. The allocation ratio for Monday investment ,in that case, will be worse than HUDCO.

      It may be a better idea to split investment into IRFC and NABARD on Monday. Investors who have subscribed till today are assured of 100% allocation ?

      1. Hi Nn,
        I am hopeful that HUDCO refund process would get started on Monday. But, how soon Non-ASBA investors would get their refunds is a question mark. I think IRFC issue would remain undersubscribed in the retail category on Monday. Investors should focus on the NABARD issue as and when the refund amount gets credited.

  23. Hi Shiv,
    Thanks to you again…You have been so helpful to others who are need of advise. In today´s busy life, it´s hard to allocate time even to be in touch with friends n family members..however, you spend so much of your time for others.
    I have a question – Can I get IRFC Bonds that are allocated in my friend´s account , into my DMAT account ? Are these bonds transferable ?
    Kindly advise ASAP, I have only one day left to subscribe thru my friend.

    Best Regards,

    1. You can make a offline transfer. Your friend will need to fill in a transfer slip and submit it to your depository (icici/hdfc etc) for transfer you your demat account.

  24. Shiv, Rs.204.36 crore worth of bonds are still up for grab (and not Rs.184.36 crore worth of bonds), if the subscribed bond value is Rs.1265.64 crore, as mentioned by you. (1470.00 – 1265.64)

  25. Hi Shiv,
    I had read a report while googling TFB’s for FY2015-16,
    that there are TFB’s in America which are issued by States for their local bodies for various infra,redevelopments,schools,sewage systems,etc..
    I believe it would be a novel idea in country like ours where the centre has no co-ordination with the states (for example- the various Metro-Train projects many cities).
    Each and every part of our country requires basic infrastructure for its progress and also this would resolve the perennial issue of deficit of funds which many states display for their poor health and well-being…
    I am from a city and for the METRO project their was a complete lack of co-ordination between the Local Body , State and Centre.
    I still remember the company building the Metro had to wait for 6-7 months to get a clearance to pass the railway track and more delay to pass the highway…
    I drive daily 10 kms for my workplace.. time taken to travel minimum 50mins to 75 mins…
    Development at local level can be the answer for better standard of living which each an every tax-paying citizen of country earns for….
    Displays of signing high value MOU’s to show bragging rights with full page adverts in newspapers,media are pointless…
    The Centre really needs to introspect its role w.r.t. the citizen of this country.
    Your thoughts Shiv…

    1. Do you think bonds issued by debt burdened state governments would be rated AAA and would you risk investing in them? Do you think huge projects like metro is developed for public good? Proably you are from Bangalore city. I came to Bangalore in 2008 and used to travel on outer ring road (ORR) smoothly. Then the government came up with the idea of traffic signal free ORR till the new airport and constructed the stupid designed flyovers at various places. My daily commute time doubled while the construction was going on and i remember L&T’s poster saying “today’s pain is tomorrow’s gain”… Fast forward to today and the badly designed flyovers cause huge traffic jams. Public buses foolishly stop before the flyovers, people get down and try to cross the road in front of them.. then they change lane to go under the flyover.. cars have to stop creating a domino effect. Buses/Lorry breakdown in the middle of the road. If there was active traffic policing all these problems would be solved — there was no need for the money to be spent on the flyovers.

      I for one wont invest a single paisa of my money in state government bonds even if it has AAA ratings currently.

      1. Hi Bhaskar,
        The point i am trying to make here is that a tax-payer in city pays various taxes like municipal, state, central (directly or indirectly) yet the accountability of funds are never questioned. Poorly designed infrastructure for the want of showcasing progress should not be the goal, rather a properly planned future ready infrastructure is the need of the hour. After years driving on pot holed ridden roads only to know that a flyover constructd doesn’t solve the traffic woes instead manifolds the issue is the result of poorly planned infrastructure.
        And the reason i stress on CITY is bcause my city boasts of having the biggest budget in INDIA (bigger than some states). why to hold the centre/state responsible when your own local body has the funds (as shown as allocation in the budget). yes, the state and centre should intervene where there is scarcity to collect funds…

        1. The tax free bond has a cost attached. 10 year G Sec is trading @ 7.61%. The govt gets tax 2.28/1.46 so the effective cost is 5.33/5.83 vs a 10 year tax free bond @ 7.29.

          Additionally allowing the Local Govts to issue bonds may not be a good idea. Some of the biggest defaults (Orange County) etc are in this category. Puerto Rico is headed for a big bust up.

          For your local goverment, the issue is linked with administration inefficiencies and vested interests, not merely fund paucity so throwing more money will not really solve the issue. We all are aware of the pre monsoon cleaning issues..i am in the same city.

    2. Hi Aashish,
      I think everything should be privatised here in India and left to open competition. Bidding and auction processes should be made highly transparent and private players should be made accountable for every project they get awarded. At the same time, the private players should be given a reasonable margin to execute these projects. No need of any kind of subsidies or reservations.

      1. Thanks again Shiv for a sincere and honest reply!
        I hope the authorities work for a better future than bicker about the past… and try not to make this country fall into a abyss…

        1. Thanks Aashish!
          Yes, it is “Now or Never”. I think if this government is not able to take India to the next level, no government would be able to do that. Current global factors are favouring India for a medium to long term economic upturn, what we just require now is efficient execution. I think India is well positioned to take off for one of its best decades in the history of economic growth.

          1. Well said, Shiv! It is a truly a “now or never” window for us Indians. I hope we (all Indians) can keep aside politics, for next 5-10 years, and concentrate on reforms and development. -KS

            1. Thanks KS, we all have high hopes from this government! But, we have responsibilities also and we all should be responsible to our country! This country is our Mother and our Home, we all should respect it and keep it as our home! But, do we do that? I have serious doubts and probably that is why we never progress well despite having everything in our favour.

  26. Hi Shiv,
    I seems retail users are not much interested in IRFC bonds this time….any specific reason do you think? Otherwise normally it gets oversubscribed on day1 itself. I have invested some amount in these bonds….But after seeing its current state, i have serious doubt if this is a good investment.

    Thanks

    1. Hi Saurabh,
      Low subscription is a measure of poor investment for you? Then probably the bonds issued a couple of years ago offering around 8.90% to 9.01% too would qualify for a bad investment, just because they remained open for subscription for more than 2-3 days, probably 7-10 days also in some cases. Isn’t it? No, that is not the case. Its just that most people have exhausted their cash levels. I think it is a case of loss of appetite. I am not hungry doesn’t mean that food is not tasty. I hope you would agree!

  27. Dear Shivji,

    Thank you for your guidance. I am awaiting issue size for retail investors in NABARD and IRFC tax free bonds. I wish, what you had guessed should come true.

    Regards,

    Chandramouli

  28. I am writing for the first time to you. Thanks for all your timely updates.

    Do you think that IRFC date will be extended by a day or two. I have small amout left with me which I can invest today. In case HUDCO will refund by tomorrow then I will like to wait and then invest. I will be applying by ICICI direct.

    1. Thanks JP!
      It is very difficult to take a call whether IRFC or NABARD will get extended or not. Earlier they were delaying these issues unnecessarily and now they are closing it within 3-4 days of issue opening dates. I think it is best to invest via a physical application today rather than waiting for these issues to get extended. Cheque for a physical application will get presented on Wednesday and by that time your HUDCO refund would be there in your bank account.

      1. Please if you can updated the % subription of retain category by 15:00 hours so that some of us can take a decision whether to apply today or wait for the probability of some extensions for IRFC and Nabard.

        1. Hi JP,
          I think you should get the bidding done for your application. Even if its gets extended or not, you’ll have a reasonable time to get the HUDCO refunds credited. If it gets extended, then you’ll have additional time to submit your application. In case you require any help, please drop a mail to me on skukreja@investitude.co.in or message me on this no. +91-9811797407

          1. I am to apply by ICICI DIRECT which allows only one application. So I apply either today and loosed the chance to apply for higher amount at later date (in case there is extension by IRFC). If there is no extension then I loose the chance to apply on smaller amount that I possess today. Can you clarify….

                1. Shiv,
                  Seems most-likely they wont be tax-free, even if bonds are allowed, so really look forward to your regular posts in some other topics on this blog… you made this lively.

                  Thanks for your help in bidding my application today.. glad we were able to connect offline also that way and for the last TFB of the year 🙂

                  1. My pleasure Chaitanya to serve you offline as well !! Whether the government allows tax-free bonds or taxable bonds, I hope they are good for the investors as well as for the country! I’ll definitely try to keep the current momentum going by posting other interesting articles!

  29. very well said shiv people blame that they did not get reasonable allotments in all previous issues and know the retail categories have been extended then definitely we must us al these facilities and at ahigher tate of interest then all other categories

  30. Can Mr. Shiv or the other readers of this extremely helpful Blog please update us, who are quite anxious, through this forum, as soon as they receive the refunds from HUDCO Bonds application money?

    1. Mr. Shiv & Mr. Pankaj & other readers of this blog, does that mean ASBA Refunds are released earlier than other Refunds? Should they not be crediting all types of HUDCO Issue Applicants simultaneously? Could Mr. Shivv & other readers kindly share their experiences in this regards?
      For some strange reason ICICI Direct does not have ASBA facility for Tax Free Bonds, I wonder why? Despite writing to them several times they have failed to clarify.

      1. Hi S.K.,
        ASBA funds get released by the bank as soon it gets the intimation for the same by the Registrar of the issue. ASBA applicants are the first to get access to their funds. Afterwards, RTGS/NEFT refunds get processed. So, you can expect your refunds to come either today evening or tomorrow.

        1. Hi Shiv,
          Are IRFC and NABARD in a hurry to close the issue today because generally 8-10 days are required for listing and a mini vacation commences from 24 march with only 4 days remaining for FY year end ?

  31. Hi Shiv, Many thanks to you for providing guidance to small retail investors like us. With your support i was able to make investments in IRDEA, NABARD and IRFC. I am delighted to know that i will get full allotment in Nabard & IRFC. Since i started late i have not been able to fully invest my savings in TFB. Can you please advise if i can pick up few more units from secondary market closer to issue price of 1000.. Many Thanks..Abhishek

    1. Thanks Abhishek!
      Yes, you can invest your balance funds in these tax free bonds through secondary markets. Please consult your financial advisor or broker to suggest you a few of them which have recently listed on the BSE or NSE. I’ll soon share a post having all the tax free bonds issued during the current financial year along with their BSE/NSE codes and other details.

  32. Final Day (March 14) subscription figures:

    Category I – Rs. 3,992 crore as against Rs. 245 crore reserved – 16.29 times
    Category II – Rs. 3,148.14 crore as against Rs. 367.50 crore reserved – 8.57 times
    Category III – Rs. 1,293.45 crore as against Rs. 367.50 crore reserved – 3.52 times
    Category IV – Rs. 1,411.5534 crore as against Rs. 1,470 crore reserved – 0.96 times
    Total Subscription – Rs. 9,845.14 crore as against total issue size of Rs. 2,450 crore – 4.02 times

  33. Hi Shiv,
    You might have answered these questions, Since I am not monitoring the email chains, it will be great if you can answer the below ones
    1) Is any TFB expected after March this year? When is the next release of TFB?
    2) Is it true that going forward, all TFB’s will be taxable?

  34. Hi Raja,

    1) No tax-free bonds in next FY after march.
    Will have to wait till next year´s budget to know Govt´s plan for 2018.
    Only way is to buy from Secondary Market. But need to put Limits, as
    they are not very liquid and purchase price can´t be predicted.

    2) TFB can never me made taxable , as they were declared under special
    notification in Budget and thru a CBDT circular , till their end of term.
    Govt can not go back and change rules, for those instruments which are
    already issued.

    Vasu

  35. Request all to please share news of Refunds received on their Bank Accounts through RTGS transfer payments on account of HUDCO Tranche-2 March 2016 IPO issue.

        1. Shiv,
          Seems IRFC already tried to deduct the amount of that offline application, so my bank balance shows negative now. So will IRFC reject my application (as we were hoping they will deduct after 2-3 days by then HUDCO refunds should be there).
          And will there by any further issue due to cheque bounce?

          Whats the status for your other clients who followed this approach?

          1. Chaitanya, can you please share with us when exactly did you deposit/submit your offline application and did you deposit it directly in the Bank or through a Broker?
            If more details are shared by you we can understand the reason for this unexpected early debit leading to a negative balance in your bank account.

            1. I deposited yesterday 1pm in HDFC bank using the bid id u gave me in morning. Wud u be able to chk with tht bid id

        2. Yeah saw it yesterday later in the day. Damn! could have used that refund amount although I did apply for the other issues. It was just 50% allocation despite applying in the first day. Thanks

  36. I received my refund from HUDCO tranche 2today. It was ASBA.
    Thank you Shiv, you helped me invest it today in irfc and I hope to get full allotment

  37. Sir, have you noticed SBI NCD Retail 9.75% (NSE SBINN3 ?) were bought back by SBI recently, is this true ? The said NCD not trading on BSE too. Please respond.

    1. Yes Naeem, that is right! SBI N3 Bonds carrying 9.25% coupon have been purchased back by SBI using its call option. The day SBI issued these bonds I knew that they will exercise this option after 5 years (10-year N3 bonds) and after 10 years (15-year N2 bonds). It doesn’t make any sense for SBI to pay 9.75% or 10.25% in the current scenario.

      1. Thanks Sir, can I now buy SBINN5 (9.95% 15yr NCDs from 2010) so as I get better interest ?
        Also, are there Ttax free bonds of reliable companies giving better int than the current IRFC, Nabard ? pls advise.

          1. Thank you Shiv for this information. For members in family who dont have any taxable income, this (SBIB N5) still is a very good option. Yield right now is 8.4%.

            1. Hi Abhishek,
              Yield is higher than 8.4% actually. These bonds are trading “Ex-Interest” now. However, 8.4% yield is not considering this event. After April 2, when the interest gets paid to the bondholders, its actual yield will start getting reflected on the NSE.

      1. Should it take so long?. At least they should make allotment to retail, investors before Holi, as everyone is going to get hands full quantity (lol)

  38. post and ppf interest rates have been heavily reduce by the government they have even touced senior and girl child scheme so al these tfb will rally on Monday isn’t it shiv important comments on this news please

    1. Other day when I went to bank to take loan on FD to apply for TFBs. The manager causally asked any urgent expense? I told him about NABARD TFB. Believe me or not, he asked under which section it was tax free?. That was the level of awareness of TFBs outside. After 3 years, when you say 8.9 % interest TF, people would be shocked.

  39. Dear Shiv
    Reg PFC TFB october 2015 issue- I got allotment 100 plus bonds and the refund also, and it appears on the demat acccount INExxxxx39.but i have not yet received the allotment letter from the company, is it important to get the “physical”letter. If needed how to get it.
    Please advice.
    drpaulose

    1. Hi Dr. Paulose,
      It is not that important to have the allotment letter if you have already received your bonds in the demat account. If you still require it, you should contact the Registrar of the PFC issue.

  40. Hello Shiv,

    I wanted to purchase bonds from the secondary market and wanted to know if there is any database which lists the current YTM. the ones on ICICI direct are not accurate

    Thanks.

      1. Many thanks, is there a similar listing for bonds traded on the BSE ? Also noticed that for large number of tax free bonds don’t have a YTM @ LTP in the link you provided.

    1. Mr. Shiv, strangely both NSE & BSE the YEILDS for all TFB’s are not displayed at all. Any reason why? Don’t these stock exchanges have a responsibility to maintain data integrity and completeness? Difficult to understand the ‘chalta-hai’ attitude of both NSE & BSE.

  41. Applied for full lot under retail category & full amount debited. Means 1000 bond allotted. Once again thanks to Mr. Shiv for his timely advice. In current situation where interest rate is fallen this will be certainly good long term investment..

  42. Shiv – Since the reduction of interest under small savings/PPF schemes – may lead to an increased demand for TFBs – what’s your guesstimate around the secondary market price for the IRFC & NABARD TFBs (on the day trading is allowed)?

    Is 28Mar still the expected date for secondary market listing for these 2 TFBs?

    1. Hi Bobby,
      IRFC tax free bonds are getting listed on the BSE and the NSE on Monday. I think these bonds should get listed at around Rs. 1,030 +/- Rs. 5 on the exchanges.

  43. Hi Shiv,

    I have one general question.

    Interest rates are currently on the decline and these tax free bonds are offered at 7.64% coupon rate for 15 years.

    In 15 years the interest rate cycle could turn around and the interest rates could increase (as seen previously).

    Isn’t it an loss then since I believe these TFB will still be at the same rate (7.64%)?

    Thanks,
    Venu

    1. Hi Venu
      Like Jesus said, do not be anxious about tomorrow. Yesterday’s the past, tomorrow’s the future, but today is a gift. (That’s why it’s called the present).
      The truth is no one knows what will happen tomorrow.

    2. Hi Venu,

      Interest rates can go up or down in the next 15 years and the returns may get averaged out. One needs to take a calculated risk in this regard. Please note that if you are in a 30% tax bracket and are likely to step down to lower brackets in the next 15 years, then you would get an assured returns of about 10.9% which you cannot get consistently for the low risk investments. Also, for some, investing in TFBs is a matter of pride to be a part of building the nation.
      Thanks,
      Janaki

        1. Shiv, I meant the equivalent effective taxable yield for 30.9% bracket even if the coupon rates are lower. I gave a very approximate number though we see that many of the TFBs have yields more than 11%.

          Shiv, I have one question. In the listing (NSE), I find that the coupon rates are lesser than what it was when issued initially. Why is it so?

            1. Hi Shiv, I guess I made a mistake of referring to various different series like N3, N4 etc., On checking again, I found that for retail customers (Category 4) the IRFC “NJ” series has the same coupon rate as the ones that came out this year. Similarly NHAI has “NA” and the coupon rates are the same.

              Shiv, what does YTM at LTP (Last traded price)% means? Also, please let us know how one should go about deciding which TFBs to buy from the NSE.

              1. Hi Janaki,
                YTM at LTP means that if you buy the bond at the last traded price (LTP), your investment in that bond will effectively earn you the yield to maturity (YTM). One should buy the TFBs from the secondary markets keeping YTMs, liquidity, profile of the company and his/her requirements in mind.

    3. Hi Venu,
      Yes, interest rates could go up again in future and in that case, the market price of these bonds would come down. But, then anything can happen and there is a possibility that you may not see these high rates again for a very long period of time. In that situation, it would be very fruitful to have these bonds in your portfolio.

  44. TFBs are to be seen as bonanza for those who got allotted. We bought right, let us sit tight. Our only prayers should be the government in the coming years honour the promise given to us.

      1. It might be tax free status given to these bonds. Government should not come with clause like those who are getting more than rs 50,000 as interest from TFB should pay the tax on interest earned over rs 50,000. There is more uproar in the media like only rich ppl are investing in TFB.

          1. Shiv … You may be right … or wrong! How are you so sure? If you have some reasons for thinking so would like to know.

            (btw: I used to think that Debt Funds LTCG cannot be increased to 3 years but it happened. I am thinking Equity-funds LTGG tax-free beyond 1 year will remain so; but it got seriously discussed before 2016 budget, but did not happen this year). I feel Tax Exemption “Limit Amount” for Interest from Tax-free Bonds would/could be raised.)

              1. Thanks for reply, Shiv. I also believed so really. But now with much publicity to “celebrities” putting crores in TFBs, I am not 100% sure anymore.

            1. I don’t think Govt will may ever say the TFBs are now Taxable (that will be an oxymoron!) .. but they may say “all” Interest Income above a limit (say, Rs 2+ Lacs p.a.) will be Taxable starting on April Fools Day (1-APR-20xx). Ostensibly, to tax the super rich.

            2. Hi Dr. Paulose,
              Yes, the government has the authority to amend the laws to make TFBs and NRE deposits taxable. The investors have no authority to stop the government from doing that. But, this government has promised not to implement any such move retrospectively. So, I don’t think this government will take any such move.

  45. IRFC tax-free bonds to get listed on the BSE & the NSE on Monday, March 28th – http://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20160323-7

    Here are the BSE and the NSE codes for the same:

    7.29% 10-year bonds – BSE Code – 935680, NSE Code – NN
    7.64% 15-year bonds – BSE Code – 935682, NSE Code – NO

    Deemed date of allotment has been fixed as March 22, 2016. Interest will be paid on October 15th every year.

  46. Dear Amit,KS and Paulose Ko,
    I agree with Shiv Kukreja that there is no prospect of the central government suddenly imposing tax on TFB interest.I believe that you three may have been influenced by the recent aborted attempt to impose tax on EPF withdrawal with prospective effect.But please note that even in that original Union budget announcement,the annuity option offered tax free treatment as a direct incentive to generate a pensionable society.Every Union finance minister,regardless of political affiliation,relies on principles of fairness and equity,though the logic may be different.India is inevitably moving towards a consumption-led economy and low interest rate regimen akin to the western economies.Some celebrities may have invested in TFB issues but haven’t so many more qualified institutional bidders and middle class investors like you and me also invested?I am sure that our central finance ministry deploys a sense of proportion while considering any controversy. So Shiv, with his amazing insights and deep exposure,must be right in affirming the high credentials of TFB issues.

    1. Dr.Sharma, thanks for the valuable inputs. Few days some of the readers mentioned here that India is developing country and can’t be compared with Japan or another developed country. You have rightly mentioned that India is inevitably moving towards a consumption-led economy and low interest rate regimen akin to the western economies should happen. I agree with you fully.

    2. Thanks, Dr Sharma and Amit for your comments. I too am an Optimist. In the past 50+ years I have seen India developing and transforming dramatically with my Own Eyes. Even though the pace has been excruciatingly slow. Many countries ravaged by Wars, have made dramatic improvements and development. But our hugely diverse population has made it a slow-paced development; in order to carry everybody along in a democratic way. Even our politicians often do see value for fair and principled reforms, when elected to high positions (except when a reform decision is likely to hit the Vote Bank adversely). I do agree moving towards a consumption society and low Interest regime is best for us. Looking forward to the day (hopefully, in my life-time, before these 15-Year TFBs mature) to move ahead of China in terms of development and modernization. Cheers. -KS

  47. 1) Request you to kindly advise best 5-6 Debt Mutual Funds Growth Option where we can safely invest retirement savings for few years and which lend to safe companies. Also please advise MF DEBT FUNDS Short term & long term Capital Gains & suggest which option to choose.
    2) Please advise best TFB’s buys in secondary market from earlier lots which are available at favorable prices, good yields & above all GOOD LIQUIDITY.

  48. It is highly unlikely that any govt tries to change the TFB isdued taxable. May be they will not allow such bonds in future. Unwanted worries on our investments will give rise to anxiety related illness. That way what is the guarantee that we will get our capital in Fd or these investments back if the economic conditions worsens as happened in Cyprus and Greece. It is highly recommended to adopt a diversified portfolio in terms of investments. Having high exposure in one investments are risky. Those looking for debt bonds I suggest investing in Gilt bonds or similar highly protected funds with exposure to AAA bonds.

    1. Mr. George/Mr. Shiv,
      1) Please share more information on GILTS, how to select/invest, interest rate, period, liquidity etc.
      2) Please share which good DEBT FUNDS have AAA only invested? Will be grateful for such AAA best 5-6 Debt Fund Scheme names please.

        1. Mr. Shiv, normally you are helpful, & your blogs are focussed on investment related issues, but at certain times you are somewhat reticent in sharing information which may be of considerable help to all readers of your blog. Curious to know why you had not shared information on names of best TFB picks from secondary market earlier on my query?
          Now, again on my query on Top Debt Funds you have skirted the issue and deprived your loyal readers of your extremely valuable inputs.

          1. SK, Shiv is a Financial consultant and he is also running a business on investments. It will be better you contact him directly so that he can help you in your MF investments. He may have limitations in sharing all the info in this blog and I am also not suppose to do that considering he is running this blog which is part of his business. He will also have to keep in mind about the regulators.

            1. I do not agree with both Mr. Shiv & Mr. George regarding the ‘regulations’ bit as an excuse to avoid responding to my query. One finds so called ‘experts’ the entire day on TV & print media recommending all sorts of investments, does that mean that they are going to land behind bars for breaking such ‘regulations’?

              Yes, at the same time I do appreciate the reality that Shiv too needs to make a living. I also appreciate that this blog is a visible means to attract prospective clients and Shiv will only share information if such clients are willing to pay for his expert advice.

  49. IRFC TRANCHE#2 TAX FREE BONDS ISSUE -MARCH 2016

    Received Allotment advise from KARVY. Was surprised to see 20% TDS i.e.Rs 501.00 has been deducted on a paltry amount of Rs. 2511.78 being the interest on Application Money.

    Such small amounts normally do not attract TDS. Even if they do it is only @10% (not 20%).

    Could you please throw some light on this anomaly

      1. Yes, I too am aware that TDS will be adjusted during ITR filing. However, the question is why are they deducting it in the first place for small amounts of Rs 2500 or so. Banks too deduct TDS only if amount exceeds Rs 10,000 per FY.
        Most importantly, why has KARVY not deposited the amount with the tax authorities so far, since it is not reflected in my FORM 26AS either?

  50. what will be the most liquid, best traded best tax free bond to buy from secondary market while ensuring that the buyer does not pay disproportionate premium for the purchase. what is the reasonable time mwithin which the bond should appreciate in value to offset the premium paid ?

  51. If we buy the tax free bonds from secondary market will the interest rate remain same or we get 0.25% less than the published rates during the IPOs.

    Thanks

    JPM

  52. For tax free bonds from secondary market will the interest rate remain same or we get 0.25% less than the published rates during the IPOs.

    Thanks

    JPM

  53. irfc 7.64 march -2016 bonds . what is the tax liability when u sell in market through broker etc. are there any short term /long term capital gain tax? pls explain

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