This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at firstname.lastname@example.org
After a reasonably good response to the REC tax-free bonds, the next eligible company to come up with such an issue is Housing and Urban Development Corporation Limited (HUDCO). The company will be launching its issue from the coming Tuesday, September 17.
The rates the company is going to offer in this issue are higher than the rates offered by REC in its issue, which is still open and getting closed on September 16. There are two reasons for it, firstly, HUDCO issue is ‘AA+’ rated and that is why it can offer rates 10 basis points (or 0.10%) higher than any ‘AAA’ rated issuer. Secondly, the average G-Sec rates have been ranging higher in the past 10-20 days than they were earlier when REC came up with its issue.
As compared to REC’s 8.26% (10Y), 8.71% (15Y) and 8.62% (20Y), HUDCO is offering 8.39%, 8.76% and 8.74% rate of interest for the respective tenors.
Though the interest will be paid annually, I do not know the interest payment date as yet, as the final prospectus filed on September 11 is still not available on SEBI’s website, on BSE’s website, on HUDCO’s website and not even on any of the lead managers’ websites. It is quite disappointing for me not to have the prospectus available for public reference even three days prior to the issue opening date.
HUDCO is allowed to raise Rs. 5,000 crore from tax-free bonds this financial year, out of which it has already raised Rs. 190.80 crore through private placement. So, now it plans to raise the remaining Rs. 4,809.20 crore through this public issue, including the green-shoe option of Rs. 4,059.20 crore. The base issue size is Rs. 750 crore.
The official closing date of the issue is October 14 and the company may extend or preclose the issue, depending on the investors’ response to the issue.
There are many things which are common in this issue and the REC issue, so I will quickly state those features which are different in this issue.
Rating of the issue – CARE and India Ratings have assigned a rating of ‘AA+’ to this issue, which is also ‘Secured’ in nature. HUDCO is wholly-owned by the government of India, so the investors’ investment is quite safe.
Listing – HUDCO will get these bonds listed only on the Bombay Stock Exchange (BSE). The allotment and the listing will happen within 12 working days from the closing date of the issue. Investors can apply for these bonds either in physical form or in demat form, as per their comfort and requirement.
Interest on Application Money & Refund – The investors will get interest on their application money also, from the date of investment till the deemed date of allotment, at the same rate of interest as the applicable coupon rate is. Unlike REC issue which is to pay 5% p.a. interest on the refund money, HUDCO will pay the applicable coupon rate.
Categories of Investors & Basis of Allotment – The investors again have been classified in the following four categories and each category will have certain percentage of the issue reserved for the allotment:
Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue is reserved
Category II – Non-Institutional Investors (NIIs) – 20% of the issue is reserved
Category III – High Net Worth Individuals including HUFs, NRIs & QFIs – 30% of the issue is reserved
Category IV – Resident Indian Individuals including HUFs, NRIs & QFIs – 40% of the issue is reserved
QIBs portion had 20% of the issue reserved in the REC issue and after observing their response in that issue, their reserved portion has been reduced to 10% in this issue. Category III HNI investors will get this 10% share of the pie. NRIs are eligible to invest in this issue as well, on a repatriation basis as well as on non-repatriation basis. Qualified Foreign Investors (QFIs) are also eligible.
Minimum & Maximum Investment – There is no change in the minimum investment requirement of Rs. 5,000 i.e. at least 5 bonds of Rs. 1,000 face value each. Retail Investors’ investment limit stands at Rs. 10 lakhs, beyond which they will be considered as HNIs and will get a lower rate of interest.
Interest rates of this issue look very attractive to me. Earlier I used to say that the investors in the 30% or 20% tax bracket should consider these bonds, but now I advise investors even in the 10% tax bracket to go for these bonds. Though not strictly comparable, these bonds are attractive even against IIFL NCDs or Muthoot NCDs.
I think the way Indian rupee and the stock markets have recovered in the past 10 days or so, the G-Sec yields should also start falling soon. Going forward, I think the rates should not be higher than these HUDCO bonds, unless US Fed Reserve has something very dramatic in store for us in its meeting on September 17-18.
Link to Download the Application Form of HUDCO Tax-Free Bonds
If you need any further info or you want to invest in these bonds, you can contact me at +919811797407
208 thoughts on “HUDCO 8.76% Tax Free Bonds Issue – September 2013”
sir,i have 150 hudco taxfree 2013-14 tranche-2 bonds,interest for the year 2015 is due in january16,but till today (26/4/2016) i not received the same.carvy says that hudco will give you int directly to you.now you suggest me what to do?to whom i have to contact?please give me complete detail and address( e-mail) .thanks.can i get interest for delayed period?
Karvy is the Registrar for these bonds and it is Karvy itself which is supposed to sort out this matter. You should contact Karvy once again for the same.
Will you please help me providing the email address of 876hudco24 tax free bond (trench -ii/2013). I have not received any interest on these bonds since january 2015. will you please tell me the ststus of these bonds i.e. weather the same is being processed for compulsory redemption.
Hi Mr. Satapathy,
Interest for 2016 is due to be paid on 13th January. It will be credited by then to your bank account.
Thanks for the information
You are welcome Mr. Satapathy!
is their any certificate issued when tax free bonds are in demat account
Allotment advice gets issued to the investors on their registered address of their demat account.
Has anyone received the interest for these bonds yet.
Interest payment date is October 25th every year, so it must have got paid on October 25, 2014.
Yes, Shiv is right. I got my interest paid directly to my bank account on 25th October last year.
Ihave received the allotment letter for the HUDCO bonds issued in October 2013. I have not received the Certificate as yet. Whom should I contact
You need to contact Karvy Computershare, the Registrar for HUDCO bonds – http://mis.karvycomputershare.com/ipo/
Shiv Kukreja, Sir, I have recvd Hudco allotment letter and interest refund letter in Oct, but I have not yet received the ‘letter of Intimation’ as per stated in the allotment letter.(Upon receipt of this said letter I have to send the’ letter of allotment’ duly signed to Karvy, who will then send me my bond certificates.Pl nform if this letter of intent has been recvd by others.
Yes, you’ll have to send this letter back to Karvy Computershare in order to receive your Bond Certificate. I think it is applicable for only certain issues.
I would like to invest in interest tax free bond
which is the best bond for safe investment and
best rate of interest and must be in demat a/c
Hi Mr. Raman,
At present, only two tax-free bond issues are available for subscription – NHAI and IRFC. You can have both these bonds in your demat account. Here are the links for comparison purposes:
HUDCO bonds got listed today on the BSE. 8.76% 15-year bonds hit a high of Rs. 1,000, low of Rs. 999.75 and closed at Rs. 999.75. Total bonds traded on the BSE were 3,884.
With today’s repo rate hike of 0.25%, is it expected to have newer Tax Free bonds with higher coupon rate?
As I had mentioned earlier also, 0.25% hike in Repo Rate & 0.25% cut in MSF Rate was already factored in by the markets. We know by now that Coupon Rates of Tax-Free Bonds are linked to the benchmark G-Sec rates. After the policy actions by the RBI, G-Sec rates have fallen slightly. So, as of now, I don’t think that the coupon rates will be higher with the upcoming tax-free bonds. Inflation, fiscal deficit, Policy actions, industrial production, oil prices, QE tapering etc. will be the key factors on which the interest rate movement will depend.
I had applied for hudco tax free bonds on 5 Oct 2013. I had applied for the bonds in physical format. When I am likely to get the bonds alloted/actual bonds.
I am following your site regularly to know the developments in bonds market.
thanks a lot
Normally a company issues allotment letters first and then sends bond certificates to the investors in about 2 months time. I think by now you should have got the allotment letter from the company against your investment. You should wait for a few days more and I hope you’ll get both the allotment letter and the bond certificate. If you don’t want to wait for the allotment letter for confirmation of bond allotment, you can contact the Registrar for the same.