IDFC Long Term Infrastructure Bonds

Also read about the REC Infrastructure bonds here or the IDFC Infrastructure Bonds Tranche 2 here.

Like NPS, I have not written much about Infrastructure Bonds, and reader Gaurav helped me yet again by providing some information to start off this post about Infrastructure bonds, and a big thanks to him for that.

Since IDFC is coming out with its long term infrastructure bonds – I thought I’d take this opportunity to tell you about the IDFC infrastructure bonds, as well as cover the basic concept as well.

Tax Saving Long Term Infrastructure Bonds

A popular reason to invest in long term infrastructure bonds is because they allow you to reduce Rs.20,000  from your taxable income over and above the Rs. 100,000 limit under Section 80 (C).

So, the most you can reduce your taxable income without using the long term infrastructure bonds is Rs. 100,000, but investing money in these bonds gets you an extra Rs. 20,000 off your taxable income, and you can reduce your taxable income by a total of Rs. 120,000 by investing in these long term infrastructure bonds.

This increases your effective yield because along with the interest you earn on these infrastructure bonds, you save on tax as well.

These bonds are good for a maximum of Rs. 20,000 as far as the tax saving aspect is concerned, so if you buy bonds worth Rs. 30,000 and nothing else, even then the maximum you can reduce from your taxable income is Rs. 20,000 because that is the cap on tax benefits on infrastructure bonds.

From whatever I’ve read – I think that the Direct Tax Code (DTC) will not impact the tax saving aspect of these long term infrastructure bonds, but if someone knows otherwise, then please leave a comment about it; I think there is a little bit of uncertainty about this.

Features of the IDFC Long Term Infrastructure Bond

The tax aspect that I spoke about earlier is of course one of the major benefits of the IDFC Infrastructure bonds, but let’s take a look at some of its other features as well.

Interest Rate of 7.5% or 8.0%

These bonds are getting issued under two lock in options:

1. Ten year maturity: The bond will be issued with a ten year maturity and offer 8.0% interest per annum.

2. Ten year maturity with an option for buy-back after 5 years: This bond will also be issued with a ten year maturity, but there will be buy back option after 5 years. The interest rate on this is 7.5% per annum.

Further, under each of these options, you can choose to get the interest accumulate or paid out to you annually.

Minimum Investment in the IDFC Long Term Infrastructure Bond

The face value of the infrastructure bond is Rs. 5,000, and you have to apply for a minimum of two bonds, so the minimum investment in this infrastructure bond is Rs. 10,000.

Open and Close date

The infrastructure bond issue opened on September 30th 2010, and will close on October 18th 2010.

Credit Rating

IDFC has received the LAAA by ICRA which is it’s highest rating, and these infrastructure bonds are secured debt also, so in that respect they are relatively safe.

Listing on the stock exchange

After the initial lock in period, the bonds will list on NSE and BSE, and you’d have an option of selling them on the exchange if you don’t want to wait till maturity.

How do these bonds compare with fixed deposits?

A quick look at my fixed deposit interest rates page shows me that most banks are currently offering between 7.25% to 8.00%, so the interest rates on the IDFC bonds are quite comparable.

However, and this is a big however, there are several banks that offer interest rates of 7.5% or thereabouts for lower durations like 2 or 3 years as well.

So, you could potentially be stuck with a lower interest rate if interest rates climb up in the future.

The other thing is that the IDFC Infrastructure bonds compound annually, whereas some of the bank fixed deposits might compound quarterly which gives you a slight edge as well.

How can you invest in IDFC Infrastructure Bonds?

First off, let me tell you that you can’t invest in these bonds by writing an email to me. Regular readers won’t believe the number of emails I get from people who want to invest in Tata Motors or Sriram Finance fixed deposits. I think the people who write these emails are mostly search engine visitors, so I hope at least some of them will see this.

Okay, now that we have that out of the way, you can invest in the IDFC infrastructure bonds by going through your broker like ICICI Direct or by approaching a bank that’s the authorized to sell it.

Here are the details  from the IDFC page:

To Invest in IDFC Infrastructure Bonds

Direct No. Internal Ext No.
Darshana Thanawala : 022-4342 2860 22860
Pooja Pawar : 022-4342 2887 22887
Pooja Panchal : 022-4342 2849 22849

Contact / Visit : Any of the nearest Lead Managers / Brokers ( listed below )

Kotak Securities Ltd. Enam Securities Private Ltd
Sharekhan Ltd JM Financial Services Pvt. Ltd
ICICI Securities Ltd RR Equity Brokers ( P) Ltd
SMC Global Securities Ltd Bajaj Capital Ltd
Almondz Global Securities Ltd HDFC Securities Ltd
NJ India Invest Private Ltd
Sharekhan Ltd ICICI Securities Ltd
HDFC Securities Ltd

Queries : For any Queries on IDFC Infrastructure Bonds
Email :
Website :

Call : 022 – 43422 860 / 43422 887 / 43422 849

Issue closes : October 18, 2010

As a final word, thanks to Gaurav for nudging me to write this, and please leave your comments to add any thoughts you might have.

Click here to read some more points about the IDFC Infrastructure Bonds.

Click here to read about the Coal India IPO

110 thoughts on “IDFC Long Term Infrastructure Bonds”

  1. I had applied for IDFC long term infrastructure tranche 2 bonds (IDB0273200) when like to know the procedure for buyback.

  2. MY FOLIO NO.IS IDB 0153670.I HAVE 4 UNITS OF RS.5000/-EACH.

  3. Dear Sir
    I , Ritu Gupta , folio no. IDBO 104860 ,unable to get my documents for bonds for which i have applied in Jan , 2011, as nobody was there to take the documents.I want to change my Address from A-125 , Preet vihar,Delhi -92 to C-16 , East End Appartments , Mayur Vihar , Phase I Extn,
    Delhi – 110096.

  4. I have been told by one financial adviser is that it is wise to invest in MF or other bonds than Infra Bonds coz they yield only 8-9% where as MF can yield 12-15%.

    1. Seeth – comparing bonds and MFs are like comparing apples and oranges – one is a debt product, another equity. If you are looking to make use of the tax benefit from these bonds then it makes sense to invest else there are other fixed deposit schemes that will yield higher and have better safety.

      I think this post about differences in FDs, Infra Bonds and Infra MFs will be useful for you.

      1. Dear Manshu,

        Can you please clarify
        If the bonds are listed it may fluctuate based on market and we may or may not get the amount invested. is it true. What is the risk involved when compared to MF

        Can you please advise, what is the current value (approximate) of a IDFC bond issued 5 years back..just for comparison. Value of the capital eg Rs 5000 not the interest.



        1. Dear Suresh – the fluctuation if there’s any will only affect if you sell it on the market. You always have the option to go for the buyback in which case you will get the full principal and there’s no fluctuation.

          Since these type of bonds were issued only last year there is still no market for them.

  5. Hi,

    I have taken IDFC infra bonds. WHile taking them i issued a cheque but it returned due to name mistake…. what will happen like whether i will get infra bond or not…. any one can help me

  6. Yes….of course u can take benefit if payment is made from your account and your wife is not having a separate income tax file…….

  7. Thanks a ton Manshu for ur quick response. I will go through the link given by you. I m really interested in these bonds and was looking for some information and while searching on net i came through ur site, this is really helpful in other investments aspects too. Good job… keep it up. Again thanks for providing such good info on site.

  8. As per my understanding of these bonds there are 2 differences in 5yrs and 10yrs bond-
    After 5 Yrs lockin u can sell them onto stock exchange or can use buyback option and in 10 y r termu do not have such option till completion of 10yrs. And there is some difference in rate of interest offered on these two tenures.

    Please correct me or add anything which i dont know.

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