IFCI has come out with the first infrastructure bond issue of this year, and I was a bit surprised to see how early they came out with the issue this time.
They had to come out with several tranches last year because they were never able to reach their targets, and I think the same thing is going to happen this year as well.
They will come out with several tranches and so will the other players who are allowed to issue infrastructure bonds.
I had written a fairly comprehensive post on Section 80CCF infrastructure bonds FAQ last year, and you can read that post and the comments to familiarize yourself with these bonds if you aren’t already aware of them or need a refresher.
I think it’s too early to buy these infra bonds right now, and it’s better to wait for a few more issuers to come out with their issues. Don’t expect a much higher interest rate from the other issuers though because the interest that they can offer is capped, and the interest rate difference isn’t going to be much.
The other thing that I want to emphasize is that the real benefit of these bonds is that they allow you tax benefits to the tune of Rs. 20,000 over and above what you save by investing in Section 80C instruments, so if you don’t think you will be able to max out Rs. 1 lakh investment in 80C, then don’t bother with these bonds.
I’m going to review each of these issues in detail, and use this page as a calendar and summary page for every infrastructure bond issued.
If you want to see some more details on the issue then let me know and I will modify the table.
| S.No. | Issuer | Series | Tenure | Open & Close Date | Interest Rate |
| 1 | IDFC Tranche 2 | Series 1 | 10 years with a buyback option at 5 years | Jan 11 2012 – Feb 25 2012 |
8.70% |
| 2 | IDFC Tranche 2 | Series 2 | 10 years with a buyback option at 5 years | Jan 11 2012 – Feb 25 2012 |
8.70% compounded annually |
| 3 | Srei Infrastructure Finance | Series 1 | 10 years with a buyback option at 5 years | Dec 31st 2011 – Jan 31st 2012 |
8.90% |
| 4 | Srei Infrastructure Finance | Series 2 | 10 years with a buyback option at 5 years | Dec 31st 2011 – Jan 31st 2012 |
8.90% but compounded and will be paid at maturity |
| 5 | Srei Infrastructure Finance | Series 3 | 15 years with a buyback option at 5 years | Dec 31st 2011 – Jan 31st 2012 |
9.15% |
| 6 | Srei Infrastructure Finance | Series 4 | 15 years with a buyback option at 5 years | Dec 31st 2011 – Jan 31st 2012 |
9.15% but compounded and will be paid at maturity |
| 7 | REC | Series 1 | 10 years with a buyback option after 5 years | Dec 19 2011 – Feb 10 2012 |
8.95% but compounded and will be paid at maturity |
| 8 | REC | Series 2 | 10 years with a buyback option after 5 years | Dec 19 2011 – Feb 10 2012 |
8.95% annual |
| 9 | REC | Series 3 | 15 years with a buyback option after 7 years | Dec 19 2011 – Feb 10 2012 |
9.15% but compounded and will be paid at maturity |
| 10 | REC | Series 4 | 15 years with a buyback option after 7 years | Dec 19 2011 – Feb 10 2012 |
9.15% annual |
| 11 | L&T Infra | Series 1 | 10 years with a buyback option after 5 years | Nov 25Â 2011- Dec 24 2011 |
9.00% payable annual |
| 12 | L&T Infra | Series 2 | 10 years with a buyback option after 5 years | Nov 25Â 2011- Dec 24 2011 |
9.00% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
| 13 | IFCI Infra Series IV | Series I | 10 year with 5 year buyback | Nov 30 2011- Jan 16 2012 |
9.09% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
| 14 | IFCI Infra Series IV | Series II | 10 years with a buyback option after 5 years | Nov 30 2011- Jan 16 2012 |
9.09% payable annual |
| 15 | IFCI Infra Series IV | Series III | 15 years with a buyback option after 5 years | Nov 30 2011- Jan 16 2012 |
9.16% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
| 16 | IFCI Infra Series IV | Series IV | 15 years with a buyback option after 5 years | Nov 30 2011- Jan 16 2012 |
9.16% payable annual |
| 17 | IFCI | Series III – Option 1 | 10 years | Sept 21 2011 – Nov 14 2011 |
8.5% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
| 18 | IFCI | Series III – Option II | 10 years | Sept 21 2011 – Nov 14 2011 |
8.5% payable annual |
| 19 | IFCI | Series III – Option III | 15 years | Sept 21 2011 – Nov 14 2011 |
8.75% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
| 20 | IFCI | Series III – Option IV | 15 years | Sept 21 2011 – Nov 14 2011 |
8.75% annual |
| 21 | PFC | Series 1 | 10 years with a buyback option after 5 years | Sep 29 2011 – Nov 4 2011 |
8.5% interest payable annual |
| 21 | PFC | Series 2 | 10 years with a buyback option after 5 years | Sep 29 2011 – Nov 4 2011 |
8.5% interest cumulative payable at the end of the term |
| 22 | PFC | Series 3 | 15 years with a buyback option after 7 years | Sep 29 2011 – Nov 4 2011 | 8.75% payable annual |
| 23 | PFC | Series 4 | 15 years with a buyback option after 7 years | Sep 29 2011 – Nov 4 2011 | 8.75% cumulative payable at the end of the term |
| 24 | IDFC | Series 1 | 10 years with a buyback option after 5 years | Nov 21st2011- Dec 16 2011 | 9.00% payable annual |
| 25 | IDFC | Series 2 | 10 years with a buyback option after 5 years | Nov 21st2011- Dec 16 2011 | 9.00% effective, but interest will not be paid annually and a lump-sum will be paid at maturity. |
I haven’t found their prospectus yet and this info is sourced from Moneyvriksh – when I get hold of the prospectus – I will do a more detailed post.
Update 1: Fixed Option 2 interest payment detail per Shiv’s comment
Update 2: Including Option 2 per comment from Shiv (who you can contact to invest in Infrastructure Bonds & Save Tax u/s. 80CCF at skukreja@investitude.co.in)
Hi… The much awaited IDFC Infrastructure Bonds – Tranche 1 issue is about to hit the streets. The issue opens Novemeber 21st & closes December 16th. Rest of the details are awaited.
Thanks so much for the info Shiv – I wasn’t aware about it and will want to write about it so when you come to know about more details then please leave a comment. Thanks!!!
Terms of the “IDFC Infra Bonds – Tranche 1” issue are out. Here they are:
Rate of Interest – 9% p.a. (payable either Annual or Cumulative)
Issue Opens – November 21, 2011
Issue Closes – December 16, 2011
Credit Rating – “ICRA AAA” and “Fitch AAA”
Minimum Investment – 2 Bonds of Face Value Rs. 5,000 each
Listing – NSE and BSE
Tenure and Lock-in Period – 10 years and 5 years respectively
Buyback Amount – Rs. 7,695 (Cumulative Interest) and Rs. 5,000 (Annual Interest)
Maturity Amount – Rs. 11,840 (Cumulative Interest) and Rs. 5,000 (Annual Interest)
L&T Infra Tax Saving Bonds issue is also expected to hit the markets very soon.
For more info or to invest in IDFC Infrastructure Bonds & save tax u/s 80CCF, Call/SMS 9811797407 (Gurgaon, Delhi or Noida).
Thanks Shiv – that is very useful information – a post on this is coming up soon. thanks!
Hi,
Do we have to purchase these bonds every year to get deduction of that year? I mean can we use last year’s purchase for deduction?
Yes Pankaj – you have to buy them every year because the value of bonds that you purchased are what gets reduced from your taxable salary. When you bought them last time, that amount must have been reduced from your taxable salary, and that’s it. For any more tax benefits you need more investments.
Manshu, I want to invest in PFC in physical form. I am from Kolkata. Who/where should I contact to get/submit the application form, DD etc..?
If you have a Karvy, SBI Capital, ICICI Securities or PNB Investment offices somewhere nearby – try there – they may have it since they are the lead managers.
Thx. for the info.
Can you pl. include the ratings as well. That would help.
I shall do that shortly – thanks for the suggestion.
Is PFC a better option than IFCI ? if so which series should I opt for ? I am in the 30% tax bracket. Or should we wait for IDFC or other companies to start their issues ?
The following may give an idea for you.
http://www.investmentguide.co.in/bonds/infrastructure-bonds-read-this-before-you-dare-to-invest-in.html
http://www.saving-ideas.com/80-ccf-infrastructure-bonds-2011/
PFC is better than IFCI going by CRISIL rating.
Today I applied for PFC infra bonds from edelwiess.in. There they don’t have various options like IFCI. Which option they provide to me? Is there any default option for these bond issues?
Any help is much appreciated.
Now edelweiss.in has all the 4 options under the IPO section and though I’m not 100% sure but yours must be the Option 1. You can mail them @ helpdesk@edelweiss.in and get the confirmation.
Thanks for your reply. I will can see that now in Edelweiss. I am in contact with Edelweiss to find out my application status.
PFC has also come out with the Infra bond issue now opening today and closing on nov 4.
sorry for the typo – I meant AA- rating !;-)
Hi Manshu,
These bonds are unsecured, have a AA= raqting by Brickwork (Crisil rating NA). Don’t you think we should wait ?
Yeah definitely, I agree with Shiv and the reasons he gave here earlier – I think we should wait for at least a couple of issues.
What is more surprising is they dont have any ads for this issue and the information is not even updated in their website.
Hi Mithlesh, actually the issue is in the nature of Private Placement, thats the reason neither IFCI nor the Lead Arrangers can advertise this issue. Its a Compliance Call.
But as we’ve discussed above that its quite strange that the info is not available even on the IFCI website. How IFCI functions, only God can understand & the IFCI management can explain.
thanks Shiv…
I am planning to invest in this one anyway as i need to submit the proofs by december and i dont think i can afford to submit the investment proofs by dec by waiting for other issues to come. what do you say?
Hi Mithlesh.. I think Interest Rate offered by these cos. should not be the reason for anybody to wait to invest for Tax Saving. A 0.25% higher rate would make a difference of Rs. 50 in a year and Rs. 250 in 5 years, as against Rs. 6180 (30% Tax Bracket) or 4120 (20%) or 2060 (10%), a person would save by investing. Also I think Interest Rates are nearing their peaks so one should lock in his/her Fixed Income Investment at current rates.
The only thing which influences my decision to invest/wait in Infra Bonds is the quality of the financials & the management of the company. Though I’m quite confident about the safety of my money if I invest in IFCI Infra Bonds, I would avoid this issue bcoz of the way they handle their Bond issues and the lack of clear & active communication.
If I need to submit my Tax Saving Investment Proofs in a hurry, I would go for the upcoming IDFC or PFC Infra Bond issues, they are expected to come within the next 15-20 days.
Thanks Shiv!!
If the PFC/IDFC issue comes out within 15-20 days, i would certainly wait.
PFC Infrastructure Bond Issue 2011 is out. Issue opens for subscription today (September 29, 2011) & closes on November 4, 2011. Rate of Interest – 8.5% (10 years option) & 8.75% (15 years option). Lock-in-period – 5 years & 7 years respectively.
http://www.pfc.gov.in/writereaddata/WhatsNew/Term_Sheet_.pdf
http://www.pfc.gov.in/writereaddata/WhatsNew/Trance_Prospectus_.pdf
http://www.moneycontrol.com/news/business/save-tax-via-infra-bonds-pfc-hitsmarket-after-ifci_591745.html
For more info or to invest in Infrastructure Bonds & Save Tax u/s. 80CCF, Call/SMS 9811797407 (Delhi, Gurgaon or Noida).
Thank you Shiv – that was very timely – interesting to see they kept the interest rates same but added the buyback option – that sweetens the deal vis a vis IDFC.
Hi Manshu.. Didnt get you!!.. IDFC doesnt have the Buyback Option ??.. Is the IDFC Prospectus out ??
At least the info I have read so far suggests that they don’t, but I haven’t actually found the prospectus yet.
I seriously doubt that they wont provide the Buyback Option. I think No company would dare to make the Investors stay locked in these bonds beyond 5 years. But if IDFC opt to do that, they would seriously find very few takers.
I thought that was the case, but maybe it is not – I haven’t seen the prospectus yet, i’ll search for it some more tomorrow. Sorry for getting late in replying to this comment – got a little lazy 🙂
sorry …do you mean buyback option in PFC bonds? buyback option is there in IFCI as well.
Is there? That’s good then – did you see the prospectus or anything else from them?
I checked in moneyvriksh which says
buyback date as December 12 of the Calendar years 2016 and 2018.
thanks Mithlesh – that must be correct – now that i have the offer document – i’ll try and go through it tomorrow some time.
Sir, are these infrasture bonds are totally secured or some are secured and some are none secured.
I’ll have to see when the prospectus is out – that’s a good idea to keep a column for that if some are secured and some are not – thanks!
One thought: if in infra bonds if one goes for cumulative option, does the interest reinvestment count as investment under 80CCF?. If it does not, then there is no point going for cumulative option, since your interest is getting reinvested at lower rate than other market instruments. The effective yield on reinvestment would be lower than on the principal.
No it doesn’t – the only benefit as far as tax is concerned is the initial 20K that you deduct from your taxable income – that’s it.
There was an amazing amount of discussion we had here last time about these two investments option, and to me it makes more sense to get your interest paid every year, but there were several folks who didn’t want to be bothered with having to worry about what to do with the money every year and I can understand that.
Nice agreed. Did not refer to the last year posts.
IDFC is likely to come out with fresh infra confesses an internal source
Okay that’s good and expected, we’ll see what rates they offer when they come out.
hi manshu, i remember reading somewhere that rate of interest can’t be more than ten years central govt boond.
Thanks Sahil – yeah that’s right – now I remember they can’t carry a coupon of more than preceding month’s 10 year G Sec.
a bit surprised and confused. This information is not even on IFCI website.
Hey Subodh – I’ve seen the same thing happen in the last IFCI bond issue – the NCD one – the info was present on other websites but not on their own. Normally, I wait to do a full post until I can get the prospectus but since I was using this just for the calendar I thought it was okay to go ahead and do that,
Hi Manshu.. Interest Rate in Option 2 in the table above is not “Compounded Annual” rather its “Payable Annually”.
I think this Infra Bonds Calender should make the comparison among various Infra Bond Issues quite easier & help the investors in decision making. As there is very little difference among the interest rates offered by various cos. on these Infra Bonds, people who fall in 30% or 20% tax bracket & want to save their tax should make the investment as soon as possible and need not wait for the last day of the issue to invest. Last time many people got partial allotment on L&T Infra Bonds as the co. decided to pre-close the issue.
Also I think the Intrest Rates have either peaked out or about to peak out. Its been a long wait for the inflation & the ineterest rates to start falling but both have been quite rigid to fall.
Thanks Shiv – I corrected that – Can you please let me know when you find out if the prospectus is online.
Sure, I’ll do that.
I’m quite confident the prospectus will get uploaded on IFCI website before the Issue closes i.e. before November 14, 2011. IFCI guys are very efficient. 😉
LOL – they may just ask us to refer to last year’s prospectus 🙂
Hi Manshu… Information Memorandum for IFCI Infrastructure Bonds – Series III (September 21 – November 14) is now available on the IFCI website.
Here are the links for the same:
http://www.ifciltd.com/Portals/0/PDF/InfraSeriesIII/IFCI%20Infra%20III_IM_Final.pdf
http://www.ifciltd.com/IFCIBonds/InfrastructureBonds/CurrentIssue/tabid/225/Default.aspx
Thanks a lot Shiv!
It would be better to wait for other bond issuances, particularly from better credits. Any idea what is the cap on the interest rates on such bonds?
I don’t remember what their rule was but it was quite close to the Repo rate – I will find that out and leave another comment – it must be in one of my older posts.
I remember during Nov 2010, the coupon from IDFC infra bond was 8% which is much higher than the then prevailing repo rate of 6.25%.
Yeah, that’s right – think Sahil is right and it’s the ten year paper – Shiv please confirm that and save me the trouble of going though old posts please!!! 🙂
Yes Manshu, Sahil is right, its not the Repo Rate rather its the yield on 10 year G-Secs. “The yield of the bond shall not exceed the yield on G-Secs of corresponding residual maturity, as reported by the FIMMDA, as on the last working day of the month immediately preceding the month of the issue of the bond.”
Source: http://www.trpscheme.com/trp/St_Docs/Notification-No-48-2010.pdf
Notification No. 48/2010[F.No.149/84/2010-SO(TPL)], dated 9-7-2010
Awesome man – you are reliable as ever, and making my life easier as always 🙂
hehe.. God has actually sent us to do the same i.e. making others’ lives easier.. you are doing that for millions & i’m doing that for a few.. 😉
PFC bond is AAA rated. PFC is a govt undertaking so credit ualiy is not an issue, IMO.
Thanks Manshu ! This is an early bird post ! I have a Demat account with ICICI but when i checked it, the IFCI Bond was not displayed. I have noted this on earlier occasions as well with some other bonds as well (on the ICICIdirect.com website). Is there any arrangement with ICICI with those who announce these bonds that they will be promoting only some bonds preferentially on their website?
No, I don’t think these guys do it deliberately, I think it just happens that they don’t get the infrastructure set up to promote each and every bond right on day 1. I would imagine that’s what they want to do but there must be some operational hurdle in doing that.
I don’t think there is anything other than that involved here.
Manshu – If ICICI Direct and the bond house do not agree on a commission they would not list it. Last FY (Jan 2011) they did not list a PFC bond which I applies through my other demat acc.
Thanks Anand – I didn’t know about it – thanks forr letting me know.