IDFC has come out with the second tranche of its infrastructure bonds, and I thought I’d do a post on them because I love getting emails from people telling me that I should mail them their bond certificates at the earliest.
IDFC Infrastructure Bond’s second tranche is also covered under section 80CCF, which means the primary benefit of these bonds is the Rs. 20,000 reduction in taxable income it enables over and above the Rs. 100,000 deduction in the case of Section 80C.
IDFC Infra Bonds: Opening and Closing Dates
The new issue started from 17th Jan 2011, and will close on 4th February 2011.
Interest Rates and Options
The bonds offer an 8% interest rate, and you have an option of getting interest paid annually, or get a cumulative sum at the end of 5 or 10 years. The bonds mature in 10 years, but there is a buyback option after 5 years which means that you can sell the bonds back to IDFC after 5 years, and don’t have to wait the maturity period of 10 years.
|Details||Series 1||Series 2|
|Face Value||Rs. 5,000||Rs. 5,000|
|Interest Payment||Annual||No interest will be paid|
|Buyback||After 5 years and 1 day from allotment||After 5 years and 1 day from allotment|
|Buyback amount||Rs.5,000||Rs. 7,350|
|Maturity amount after 10 years||Rs. 5,000||Rs. 10,800|
The minimum investment in these bonds is Rs. 10,000, and while there is no maximum limit, you can get a lot more than 8% for shorter durations for your money in bank fixed deposits, so it makes sense to not buy more than Rs. 20,000 worth of these bonds.
IDFC Infrastructure Tranche 2 Bonds: Physical and Demat Form Available
These bonds are available in physical as well as demat form, so you if you don’t have a demat account, you can still purchase these bonds .
Credit Rating and Secured Bonds
ICRA has assigned LAAA to these second tranche bonds which indicates stable outlook and highest safety. Fitch has assigned AAA(Ind) also indicating stable outlook.
These infra bonds are secured as well.
Tax Proof for the Bonds
If you buy the bonds in physical form then you will receive a receipt, and some people have indicated that this receipt has been used by them as tax proofs. I’m not sure if everyone is able to do so, but that’s one option, and you should check with your company CA to see if this will do.
Once the bond is allotted, you will get an allotment advice indicating that you have bought the bonds, so you can use that allotment advice for tax proof. Keep in mind that you should update your mailing address attached to your Demat account and trading account, so that there are no issues later on.
Last time around, there was a very good feature with the IDFC bonds where they made a web page where people could just input their application number, and retrieve the allotment advice. They could have it this time as well, so don’t lose your application number.
How to buy the IDFC Infrastructure bonds?
You can buy them through a trading account like ICICI Direct; by filling up the physical forms, and submitting them in a branch that’s accepting them; or through an IFA (Independent Financial Adviser).
I don’t have a list of banks you can go to, but I see that KMCC, ENAM, HDFC Bank, ICICI Securities, JM Financials and IDFC Capital are the lead managers, so if there is a branch of one of these near your house or office, you can try them out.
One last word to let you know that this is not the website of IDFC or the lead managers, so writing a comment and email telling me to send the bond certificate to you or do the “needful” isn’t going to help you.
Now, as is custom – ignore what I just said and write a comment to tell me to send you the bond or do the needful at the earliest.
Also read about the REC Infrastructure Bonds.