Srei 80CCF Infrastructure Bonds Issue

by Manshu on January 3, 2012

in Investments

The latest company to come up with a 80CCF infrastructure bond issue is Srei Infrastructure Finance Ltd. and their issue opened on 31st December 2011 and will close on January 31 2012.

They have four options to choose from and the bond issue has got a rating of CARE AA from CARE which indicates a high degree of safety.

The main difference in the terms of this bond issue is that the buyback period is 5 years for all 4 options. So, you have two options with a term of 10 years, and then two more with a term of 15 years, but then all of them have an option to exercise buyback at the end of 5 years.

If you look at the REC infrastructure bond issue – you will see that the rate of interest is similar but the 15 year bond issue has a buyback period of 7 years instead of 5. (In the REC issue 10 year bond had 8.95% and 15 year had 9.15%)

Now, the bonds with a 10 year term have a rate of interest of 8.90% and the bonds with a 15 year term have a rate of interest of 9.15% but if you have the option to exercise buyback for all of them at the end of 5 years – then why choose the 10 year option at all?

For someone interested in this bond issue, I think it makes sense to prefer the 15 year series over the 10 year one, take advantage of the extra rate of interest and then exercise buyback at the end of 5 years. The only issue with this is I wasn’t able to find out how exactly the buyback works.

Srei Infrastructure has said in the prospectus that you have to notify them them about the buyback between six and nine months prior to the buyback date but how does one keep a track of these dates?

Do they send out a letter asking you for your preference or what other method does one follow? If they don’t send out a letter then it’s quite likely that a lot of people simply fail to keep track of when to send them the mail about the buyback.

If anyone can offer more clarity on this then please do leave a comment.

Here are some of the other important terms of the Srei infrastructure bonds.

Series

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

8.90%

8.90% compounded annually

9.15%

9.15% compounded annually

Tenor

10 years

10 years

15 years

15 years

Buyback option

5 years

5 years

5 years

5 years

Buyback amount

Rs. 1,000

Rs. 1,531.58

Rs. 1,000

Rs. 1,549.24

Buyback intimation period

The period beginning not more than nine months prior to the Buyback Date and ending not later than six months prior to the Buyback Date

The period beginning not more than nine months prior to the Buyback Date and ending not later than six months prior to the Buyback Date

The period beginning not more than nine months prior to the Buyback Date and ending not later than six months prior to the Buyback Date

The period beginning not more than nine months prior to the Buyback Date and ending not later than six months prior to the Buyback Date

This is not a government company which is a question that inevitably comes up in comments, and this post has the list of all other infrastructure bonds that are currently open.

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