L&T Infrastructure Bonds Review

Close on the heels of the IDFC Infrastructure bonds – L&T is also issuing infrastructure bonds beginning October 15th 2010, and closing on November 2 2010.

L&T Bonds: Tax Saving Infrastructure Bonds

These are classified as infrastructure bonds under Section 80 CCF which means that investing in them will reduce your taxable income by Rs. 20,000.

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.

L&T Infrastructure Bonds Features

There are 4 series of L&T Bonds, and though these bonds have a term of 10 years, there is an option of a buyback after 5 years or 7 years.

The interest rates, and effective yields of different plans are shown below:

Series Tax Bracket 1 2 3 4
Face Value —- Rs. 1,000 Rs. 1,000 Rs. 1,000 Rs. 1,000
Interest Payment —- Annual Cumulative Annual Cumulative
Interest Rate —- 7.75% 7.75% 7.50% 7.50%
Maturity —- 10 years 10 years 10 years 10 years
Buyback in years —- 7 years 7 years 5 years 5 years
Yield on Buyback 30.9% 15.23% 13.59% 17.20% 15.75%
20.6% 12.31% 11.36% 13.42% 12.58%
10.3% 9.86% 9.44% 10.23% 9.86%

L&T Bonds Minimum Investment

The minimum investment needed for you to invest in these bonds is Rs. 5,000 because you have to apply for a minimum of 5 bonds, and the face value of each bond is Rs. 1,000.

Open and Close Date

Subscription opened on October 15th, and will close on November 2nd 2010.

Credit Rating

The L&T bonds have been rated CARE AA+ by CARE and LAA+ by ICRA which indicate high credit quality and that the rated instruments carry low credit risk.

How can you invest in the L&T Infrastructure bonds?

You can invest in these bonds either in the physical form or electronically through brokers like ICICI Direct. You can buy a form through one of the several agents across the country and invest in it through them as well.

Here is a list of banks listed on their website that can give you more information as well:

  • Axis Bank
  • DBS Bank
  • HDFC Bank
  • HSBC Bank
  • ICICI Bank
  • IDBI Bank
  • ING Bank
  • SBI Bank

They also have this cool link on their special website for this bond where you can enter in your contact details and they will contact you and help you.

If any of you do decide to contact them then I am really interested to know your feedback because I tried to get in touch with the numbers given in the IDFC website, and tried at least 10 times to no avail. I’d like to know if this is any better.

Tax on interest earned from the L&T Infrastructure bond

The interest itself is not tax free. It’s only the Rs. 20,000 you get reduced from your taxable salary that helps save tax.

L&T Infrastructure bonds to list on NSE after 5 years

The Bonds are proposed to be listed on NSE, and can be traded after the initial 5 years lock-in period. After this lock-in period, the holders can also pledge the Bonds with banks for availing financial assistance.

You don’t need a demat account to invest in these bonds

L&T will offer you the option to hold the Bonds either in Dematerialized or Physical Certificate form.

NRIs can’t apply in the L&T Bonds

Non-resident investors including NRIs, FIIs and OCBs are not eligible to participate in the Issue.

Conclusion

These were some salient features of the L&T bond issue, and I hope you found this useful in order to make a decision on whether you want to opt for them or not. Keep in mind that IDFC has a similar issue running, and if you have already applied for that then you won’t get any additional tax benefit (over Rs. 20,000) by applying for this issue as well.

If you have any questions, leave a comment, and the community here will try to answer them for you.

Click here to read about the IDFC bond issue

Click here to read about the SBI bond issue

facebookShare on Facebook
TwitterTweet
FollowFollow us
PinterestSave

No related posts.

226 thoughts on “L&T Infrastructure Bonds Review”

  1. Thanxs 4 sbi bond information.I am planning to invest 35 thousand in it for 15 years.My question is what is the benifit of listing it in sensex(i am a new invester)

    Reply

    1. Just invest and wait for the listing and open it in the market. for apply please give me you postal address and mob. no. or send me the sms on mob.9311099558 A.K.Singh

      Reply

    2. Dear Mr. Ranjan,

      Kindly provide your contact Details, so I can arrange the same from my Broker.

      Thanks,
      Vishal Rochlani
      9022680160 / 9969454596

      Reply

  3. IIFCL infrastructure bonds & L&T infrastructure bonds

    SECTION 80CCF.

    Tax exemption upto Rs.6000 .

    ISSUE CLOSES – 6TH MARCH 2011 & 7th MARCH 2011

    FOR DETAILS & SUBSCRIPTION IN PUNE CONTACT ON

    9762847432

    Reply

  5. Dear Dr. B.S. Patil,

    Pl. contact me on my Mobile No. or pl. provide your contact details for further action.

    Best Regards,
    Vishal Rochlani
    9022680160 / 9969454596

    Reply

    1. Dear Santosh,

      As per my understanding, you cannot apply this Online. You will have to download the form from the website http://www.ltinfrabond.com/. Fill it up and send to the collection centre or courier to them. If you want the physical forms then do let me know, I will arrange from my Broker. You can contact me for the same.

      Bes Regards,

      Vishal Rochlani
      9022680160 / 9969454596

      Reply

  9. Hi

    I have purchased L&T infrastructure bond. As reported above, i had mailed and got the scanned copy of the bond. But i have not got the actual hardcopy till now. Have all the people got the hardcopy of the bond posted on their addresses.
    What should i do.
    I think i would need the hardcopy when i want to sell the bond after 5 years.

    Reply

    1. I have applied for Bonds 2011 B I am not able to get the allotment adivice when I put application No &sumit app No goes off but doen’t ope pl clarify

      Reply

  12. I want to invest in infrastructure bond? If i Invest 20000/- then what benifits get in 5 yrs or 10 yrs. & how we purchase infrustructure bond, for which group is better. Please explain me about the details of infrastructure bond?

    Reply

  13. I am not able to find out bond from my ICICI demat account.
    Details of amount paid: Allotment Advice No – 176265,
    Application No. 12900767, Reference No. 130512, DP ID. 45109566.

    Kindly reply to me how can find the bond.

    Reply

  14. Thanks a lot Manshu and Purna 🙂 I was also looking for a way to locate the physical copies of the L& T bonds.

    Reply

  15. Hi Manshu,
    what is the diff between buying Infra bonds thru D-mat account or thru a hard copy of the bond… ?
    1. do we need to pay more commision to the brokerage firm for buying and selling the Infra bonds compared to holding it in hard copy .. ?
    2. Is it possible to convert the hard copy of the bond to a E-form using D-mat account in future .. ? pls confirm.

    thanks,
    Srini.

    Reply

    1. All these infra bonds initially came with a Demat only option. I think that was because there is a tax law that states there will be no TDS on a Demat security that lists on a stock exchange. However, there wasn’t enough demand, and the issuers had to include a physical option, or they might have been waiting for some SEBI clearance to do that. Once that was done these issuers gave the option to invest in physical or Demat form.

      You don’t need to pay commission, for Demat, and if someone has a Demat account then personally I feel it’s more convenient to hold it in a Demat form.
      Yes, it’s possible to convert physical form into Demat after allotment is done.

      Reply

      1. Thanks.. Manshu !

        By the way, Which option would you recommend in the IDFC trance 2
        Infra bond offer
        1. first option with 8% annual interest for a period of 5 yrs
        2. 2nd option with Rs.7350/- return after 5 years

        i think both are more or less same. what would you recommend as the best option
        do you expect better Infra Bond products in the next 2 months .. ? I expected more but does n’t seem the fund houses are ready to offer more for infra bonds 🙁

        Thanks in advance,
        Srini.

        Reply

        1. I’d personally go for getting interest paid annually what with the high inflation in our country Srini. As for more bonds, I don’t know if any bonds will come out with better rates or not, but I’d say that they can’t offer much higher than this, so the absolute gain (if any) will be limited.
          Also, most people have to deposit tax proofs in a few days, so I’d keep that in mind.

          Reply

          1. Thanks.. Manshu !

            by the way , do you think, the interest rate of 8% will increase over 5 yrs will make significant diff with 2nd option considering the inflation factor you mentioned in your reply.. ? May be am wrong but i did a small calculation and found that the diff between 8% annual interest and 2nd option is just 4 rupees at the end of 5th year.

            thanks,
            Srini.

            Reply

            1. What I meant was inflation makes sure that your 1600 bucks interest is worth less in real terms every year because the prices go up, and you will be able to buy less and less from that money as time passes. So, better get that as soon as possible instead of waiting.

              Reply

  16. any idea how can i apply for IFCI infrastructure bonds through HDFC netbanking(please note my Mutual funds tab and demat tab are enabled?

    Reply

  17. Hi Manshu,
    what type of IFCI bond would you recommend in
    7 years buyback and 5 years buyback. I need your advise here and why.
    by the way, do you recommend IFCI bonds over L&T Infra bonds .. ? pls let us know and why. Thanks in advance.

    regards,
    Srini.

    Reply

    1. Hmmm – I don’t think L&T is open right now, and as far as IFCI is concerned the way they have set it up is that you can choose for the buyback option now, and then write a letter to them and request for a buyback at the end of the 5 years in a specific time-frame.

      Personally, I’d prefer the buyback so that I can get my money back faster because the main benefit of this bond is the tax savings you get, and that’s to be got up front. So in the high inflation scenario that we have going, I’d personally like to get my money back as soon as possible.

      Reply

  19. I want to take infrastructure bond. Which bonds are available right now in the market? and which one is good performing bond?

    Reply

    1. Nothing is open right now Bhumika. IFCI closed on 31st December, unless the extended the date later on which I’m not aware of. There are other issues likely to be in the future, so you can keep an eye out for them.

      Reply

    2. Bhumika – A reader just left a comment, and informed that IFCI has extended their date to 12th January 2011, so if you’re interested in that one you still have time.

      Reply

  20. i haveapplied for ltinfrabond through cheque no781356of sbop,the mall,patialaof dated15-11-10. i have applied forRs10000 having application number3718766 this cheque of 10000have been debit thourh my account but so far i have not got anything to get benefit of80 ccf gurinderjitsingh,#1013,st.no.10,gurbaxcolony,patiala,mob.no.9464844828,E-mail-gurinderjitsingh111@gmail.com

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *