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 email@example.com
With rising inflation and high fiscal deficit here in India, yields on government securities are also rising and high G-Sec yields bring along some good investment opportunities for the prospective tax-free bond investors. Many of the investors, who could not invest in the previous five tax-free bond issues of REC, HUDCO, IIFCL, PFC and NHPC, have been eagerly waiting for the new issues to get launched.
A few days back Ramadas asked me if I know when the next tax free bond issue will hit the market. Here is what he had to say:
Ramadas November 19, 2013 at 7:16 am
Do you know when next tax free bond issue will hit the market? I see IRFC has already filed prospectus with SEBI. NTPC and NHB are in the news. Any confirmed dates when next tax free bonds will be issued?
I have received many such queries in the past 15-20 days as many people have been asking this question on different posts.
As none of the companies has filed the final prospectus for its issue, nobody knows the exact opening dates of the upcoming tax free bond issues. But, with whatever information I have and based on the dates of filing of their draft shelf prospectus, here is the list of tax free bond issues which are going to hit the streets in the next one month or so.
IIFCL Issue – Last week of November – IIFCL announced earlier this month that it would launch the second tranche of its tax free bonds in the third or the fourth week of November. IIFCL has already raised around Rs. 4,200 crore out of Rs. 10,000 crore it has been allowed to raise from tax-free bonds this financial year.
HUDCO Issue – Last week of November – I have been told by a close associate that HUDCO is also planning to launch the second tranche of its tax-free bonds issue in the next 3-5 days time. The company could raise around Rs. 2,400 crore in the first tranche which got closed on October 14. HUDCO still has the authority to raise another Rs. 2,400 crore.
IRFC Issue – First week of December – IRFC filed the draft shelf prospectus with SEBI to raise Rs. 10,000 crore from its tax-free bonds issues on November 11. As observed in the past, it takes around 15-20 days for a company to launch its public issue from the date it files the draft shelf prospectus.
Also, as Shashwat shared it yesterday, an official of IRFC has told Deccan Herald that it is planning to launch its public issue in December. Taking a cue from it, I think IRFC issue should hit the streets in the first week of December.
NTPC Issue – First week of December – Just a few days after IRFC did it, NTPC also filed the draft shelf prospectus on November 15 to raise Rs. 1,750 crore from tax-free bonds. So, I expect NTPC issue also to hit either in the first week or the second week of December.
NHB Issue – Second week of December – Though NHB raised Rs. 900 crore from these bonds through private placement in August this year, it has taken more than usual time to do it through its public issue. But, now they have officially announced to launch its issue in the second week of December. I hope they do not delay it further.
NHAI Issue – Second half of December – Last month, NHAI announced its plan to raise funds through these bonds sometime in December. But, as the company has still not filed its draft shelf prospectus as yet, I do not see the issue hitting the streets before second half of December.
November was a dry month as far as tax free bond issues are concerned. But, if all these issues get launched sometime next month, it would really create a glut for these bonds in the market.
Thanks to the high interest rates scenario, these companies would find it less difficult to attract investors’ money to get invested in these bonds.
I’ll update this post as and when I have any information about any new issue getting launched and the coupon rates it is going to carry. If any of you get any kind of information, please share it here so that all of us benefit out of it.
139 thoughts on “Tax-Free Bond Issues to be launched during November/December 2013”
Looks like Ennore port has filed DRHP and no signs of IREDA issue yet. Is it worth to wait for these issues or go for IRFC ? IRFC doesnt have a 20 year option whereas IREDA will have one which is interesting for me. Hopefully IREDA come up with better interest rates than IRFC.
Even I hope that IREDA carries a higher rate of interest. I think one can wait for the IREDA issue to open as there is some possibility that IRFC issue gets extended.
My thought was as these bonds are issued by PSU’s which are backed by Govt of India so it makes that practically zero default – isnt’nt it?
so does one really need to worry about diversification sector specific?
I think it depends on person to person, company to company and sector to sector. Though I think one’s investment in these PSUs is quite safe, diversification is always advisable. I think zero default should be considered only with the government or RBI bonds.
I have a question on diversification as for an investor in tax free bonds. If somebody has invested in power sector bonds such as NHPC, PFC and NTPC, are your thoughts about investing in the upcoming IREDA (which is also in energy & power sector)? If power sector ever comes under risk would not all the above companies face the heat with consequences for the bond holders?
It is always better to diversify as much as you can. So, if one has already invested too much in a sector, then it is better not to stretch it. But, then it is difficult to anticipate an individual sector’s fortunes. Power Sector was doing extremely good under Mr. Suresh Prabhu, but the UPA government has spoiled it completely. I’ll review the IREDA issue once its details are out.
It would be great if NHB, NTPC issue extra tax free bonds within this year. Hopefully, like always, I’ll get to know about the same through your post Shiv.
They have sought government approval for this financial year only. If the govt agrees to their request, then these companies will issue these bonds this year itself.
NHB, NTPC, IIFCL seek govt nod for extra tax-free bonds
That is great! thank you.
I hope you’ve already checked this post!
I am also keenly waiting for your article on interest payment and allotment dates for all TFBs issued during last few years.
I’ll finish my work on that article tomorrow positively and post it by tomorrow evening or Saturday morning.
Regarding AIR reporting, what I Now understand is to avoid buying above 5 Lacs from one company.
could you give us some more guidelines to prevent AIR reporting.
Hi Mr. Ramesh,
I don’t understand why people always remain scared of AIR reporting. If you are doing everything in a legal manner, then how does it matter if it is getting reported or not. I am sorry, but I won’t like to cover the guidelines to prevent AIR reporting.
A very informative post , these posts helps us a lot, in investing in TFB
can u list the TFB which are likely to be launched in Feb and March this year
Only IREDA has filed the draft shelf prospectus for its tax free bond issue this month. IIFCL will launch its third tranche and Airport Authority, Cochin Ship Yard and Ennore Port are also expected to come out with their issues in Feb or March this year.
Any details on launch dare? Term and Coupon rate? Crisik rating? Thanks!
Launch Date, Coupon Rate info not available as yet. Unlike NHAI & IRFC, it will have 20-year term as well. Rated by CARE and BWR.
Any idea on IREDA tax free bonds start date and possible coupon rates? Going by previous TFB filing dates , IREDA should launch TFB next week , right?
There is no announcement yet by the company, so only guess work is possible. I’ll share the info as soon as I get any.
IREDA has filed the Draft Shelf Prospectus with SEBI for its tax free bond issue on January 21st.
Any details on launch dare? Term and Coupon rate? Crisik rating? Thanks!
Shiv, 1 request.. In the article you were planning to write about interest payout dates for all TFBs issued this FY, can you also mention the deemed allotment dates of each, so that we know the maturity date.
It is already there Chaitanya in the table I’ve prepared. Thanks for the suggestion though!
Question on AIR for investment in bonds during a financial year: If someone invests 2 lacs in NHAI capital gain bonds and 3 lacs in NHAI tax free bonds during a financial year, will this lead to reporting in AIR by NHAI (over 5 lac investment in bonds)?
Yes, it will lead to AIR reporting by NHAI.