NTPC (BSE:532355), the country’s largest power generator and a ‘Maharatna’ company, is set to enter the battlefield of tax-free bond issues from Tuesday, December 3rd. It would become the sixth company to do so this financial year after REC, HUDCO, IIFCL, PFC and NHPC.
The issue will remain open for just ten working days to get closed on December 16th i.e. Monday.
Size of the Issue – NTPC has been authorized to raise Rs. 1,750 crore from tax free bonds this financial year. The company plans to mop up the whole of Rs. 1,750 crore from this issue itself, including the green shoe option of Rs. 750 crore, as the base issue size is Rs. 1,000 crore.
Rating of the Issue – NTPC is a big company with market capitalization of Rs. 121,497 crore as compared to REC’s market cap of Rs. 22,376 crore, NHPC’s market cap of Rs. 22,326 crore and PFC’s market cap of Rs. 20,956 crore. Considering its big size and strong fundamentals, CRISIL and ICRA have assigned ‘AAA’ rating to the issue.
Like all other tax free bond issues, these bonds are also ‘Secured’ in nature and certain fixed assets of the company will be charged equivalent to the outstanding amount of the bonds.
Coupon Rates on Offer – As the issue is rated AAA, the coupon rates are lower by 10 basis points or 0.10% lower than that of HUDCO. NTPC is offering 8.66% per annum for its 10-year option, 8.73% per annum for the 15-year option and 8.91% per annum for the 20-year option to the retail investors investing less than or equal to Rs. 10 lakh.
As always, these rates would be lower by 25 basis points (or 0.25%) for the non-retail investors.
NRI Investment – Repatriation Not Allowed – Non-Resident Indians (NRIs) are also eligible to invest in this issue, but only on a non-repatriation basis. NRI investors will not be allowed to repatriate its interest amount or maturity proceeds outside India.
QFI Investment – Also, unlike HUDCO tax free bonds, Qualified Foreign Investors (QFIs) are not allowed to invest in this issue.
Investor Categories & Allocation Ratio – As always, the investors have been classified in the following four categories and each category will have certain percentage of the issue size reserved during the allocation process:
Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue is reserved i.e. Rs. 175 crore
Category II – Non-Institutional Investors (NIIs) – 25% of the issue is reserved i.e. Rs. 437.50 crore
Category III – High Net Worth Individuals including HUFs & NRIs – 25% of the issue is reserved i.e. Rs. 437.50 crore
Category IV – Resident Indian Individuals including HUFs & NRIs – 40% of the issue is reserved i.e. Rs. 700 crore
Allotment on First Come First Served Basis – Subject to the allocation ratio, allotment will be made on a first come first serve (FCFS) basis in each of the investor categories, based on the date of upload of each application into the electronic system of the stock exchanges.
Listing – NTPC has decided to get these bonds listed on both the stock exchanges i.e. National Stock Exchange (NSE) as well as the Bombay Stock Exchange (BSE) and has successfully got the necessary in-principle listing approval also from these exchanges. The bonds will get allotted and listed within 12 working days from the closing date of the issue.
Demat/Physical Option – Investors have the choice to apply for these bonds either in physical form or in demat form, whichever they like.
No Lock-In Period – These tax-free bonds are freely tradable and do not carry any lock-in period. An investor may sell them at the market price whenever he/she wants after these bonds get listed on the NSE or BSE.
Interest on Application Money & Refund – NTPC will pay interest to the successful allottees on their application money at the applicable coupon rates, from the date of realization of application money up to one day prior to the deemed date of allotment. Unsuccessful allottees will get interest @ 5% per annum on their refund money.
Minimum & Maximum Investment – Investors are required to put in a minimum investment of Rs. 5,000 in this issue i.e. at least 5 bonds of Rs. 1,000 face value each. Though there is no upper limit for the investors to invest in this issue, an investor investing more than Rs. 10 lakhs will be categorized as an HNI and will get a lower rate of interest.
Interest Payment Date – NTPC will make its first interest payment exactly one year after the deemed date of allotment. As the deemed date of allotment will be announced just before the listing date, I will update this post as and when it gets announced.
NTPC is ranked fourteenth among the top Indian companies by market capitalization. Also, at present, there are only seven central public sector enterprises (CPSEs) which have been conferred the status of Maharatna and NTPC is one of them.
Among thirteen companies, which have been authorized to issue tax free bonds this financial year, NTPC is the only company which has this Maharatna status. In fact, the company this year in March got awarded as the most efficient Maharatna in manufacturing for the year 2012.
As NTPC is fundamentally a better company, the issue is rated ‘AAA’ and the issue size is relatively smaller at Rs. 1,750 crore, I think its coupon rates are attractive enough for the issue to get oversubscribed in the first week itself. I expect the investors’ response to be even better than that for NHPC and the company to get it preclosed much before its official closing date of December 16th.
Also, I expect the issue to provide some listing gains also, like it has been the case with NHPC bonds and PFC bonds. Let us see if it meets my expectations or not.
NTPC Tax-Free Bonds – Bidding Centres
Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in NTPC tax-free bonds, you can contact me at +919811797407