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 skukreja@investitude.co.in
India Infrastructure Finance Company Limited (IIFCL) is back again to offer its tax-free bonds and as expected this time, it is carrying higher rate of interest for all the maturity periods. The issue is getting opened for subscription from Monday, 9th of December and is scheduled to get closed along with the HUDCO 9.01% issue on January 10th, 2014, which is a Friday.
Size of the Issue – IIFCL raised Rs. 1,213.01 crore from its Tranche I issue in October and plans to mop up another Rs. 3,000 crore from this issue, including the green shoe option of Rs. 2,000 crore.
If the company is able to successfully raise its target amount of Rs. 3,000 crore from this issue, then it plans to launch its Tranche III issue sometime in January again.
Categories of Investors & Allocation Ratio – Investors have been categorised in the four usual categories and the percentage allocation has been the same as it was in IIFCL’s first issue:
Category I – Qualified Institutional Bidders (QIBs) – 15% of the issue is reserved i.e. Rs. 450 crore
Category II – Non-Institutional Investors – 20% of the issue is reserved i.e. Rs. 600 crore
Category III – High Net Worth Individuals including HUFs – 25% of the issue is reserved i.e. Rs. 750 crore
Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 1,200 crore
NRIs Ineligible to Invest – Once again, IIFCL has not allowed Non-Resident Indians (NRIs) and Qualified Foreign Investors (QFIs) to participate in this issue.
Coupon Rates on Offer – Coupon rates in this issue are absolutely same as those got offered in the NTPC issue – 8.91% per annum for the 20 year option, 8.73% per annum for the 15 year option and 8.66% per annum for the 10 year option.
These rates are applicable for the retail investors investing Rs. 10 lakh or below. All other investors will see a cut of 25 basis points or 0.25% per annum for the respective maturity periods.
Rating of the Issue – Like its previous issue, IIFCL Tranche II issue is also ‘AAA’ rated. CARE, ICRA, Brickwork Ratings and India Ratings, all these four rating agencies have assigned their highest credit rating to this issue.
These bonds are again ‘Secured’ in nature as certain receivables of the company will be charged equivalent to the outstanding amount of the bonds.
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 exchange.
Listing – IIFCL will get these bonds listed only on the Bombay Stock Exchange (BSE). As required by the listing rules of the SEBI, the company has committed to get the bonds allotted and listed within 12 working days from the closing date of the issue.
No Lock-In Period – As these bonds are freely tradable, an investor may sell them on the BSE whenever he/she wants after these bonds get listed on the exchange. That is how these bonds do not carry any lock-in period.
Demat/Physical Option – Though these bonds are tradable if taken in the demat form, investors have the choice to subscribe for these bonds in physical form as well, if they don’t have a demat account or they don’t want to take these bonds in the demat form.
Interest on Application Money & Refund – IIFCL will pay interest to the successful allottees on their application money, from the date of realization of application money up to one day prior to the deemed date of allotment, at the applicable coupon rates. Unsuccessful allottees will get interest @ 5% per annum on their refund money.
Minimum Investment – Investors are required to invest a minimum of Rs. 5,000 in this issue i.e. at least 5 bonds of Rs. 1,000 face value each.
Interest Payment Date – IIFCL has not fixed the date of interest payment for this issue as yet. It has decided to pay its first due interest exactly one year after the deemed date of allotment.
NTPC issue, which got closed on Thursday, received an overwhelming response from all the categories of investors. As IIFCL is offering coupon rates absolutely same as those offered by NTPC, it is very much clear that these tax-free interest rates are very attractive.
Though I don’t expect this issue to get subscribed as fast as the NTPC issue, the investors, who missed out on the NTPC issue and/or want to invest only in ‘AAA’ rated securities, I think this issue offers a very good opportunity.
Also, a number of macro economic data is expected to get released sometime next week here, such as trade deficit for the month of November, IIP growth figures, CPI inflation, WPI inflation etc. This data will be very crucial for the RBI Governor Dr. Raghuram Rajan to take his final decision for the RBI’s monetary policy of December 18th.
One more rate hike would once again ruin the mood of the market participants in the bond markets and result in a jump in the G-Sec yields. Investors should keep a close eye on all these events also.
Application Form of IIFCL Tax Free Bonds
IIFCL Tax-Free Bonds – Bidding Centres
IIFCL Tax-Free Bonds – Banking Matrix
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 IIFCL tax-free bonds, you can contact me at +919811797407
Day 24 (January 9) subscription figures:
Category I – Rs. 474.18 crore as against Rs. 450 crore reserved
Category II – Rs. 633.02 crore as against Rs. 600 crore reserved
Category III – Rs. 741.63 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,206.44 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 3,055.27 crore as against total issue size of Rs. 3,000 crore
HNIs and Retail Investors will get full allotment. Category II investors will get allotment worth Rs. 601.93 crore as against 633.02 subscription and Rs. 600 crore reserved.
NHAI Tax-Free Bonds issue opens January 15th. Coupon Rates – 8.52% for 10 years and 8.75% for 15 years. 20-year option is not there. It is rated ‘AAA’ and closes on February 5, 2014.
Day 23 (January 9) subscription figures:
Category I – Rs. 449.18 crore as against Rs. 450 crore reserved
Category II – Rs. 632.52 crore as against Rs. 600 crore reserved
Category III – Rs. 717.40 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,187.46 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,986.56 crore as against total issue size of Rs. 3,000 crore
Dear Shiv,
IIFCL bonds issued in October 2013 have pathetic volumes. What could be the reason for this ? Can the same happen for bonds of this issue ?
Thanks
Dear TCB,
It is natural for an issue with lower coupon rates and lower subscription figures to generate lower trading volumes. IIFCL Tranche I could generate only Rs. 1,233.74 crore during its subscription period. If I want to invest in the IIFCL bonds, it is natural for me to subscribe to the current issue which is closing tomorrow rather than buying Tranche I bonds from the secondary markets.
Day 22 (January 8) subscription figures:
Category I – Rs. 435.18 crore as against Rs. 450 crore reserved
Category II – Rs. 627.98 crore as against Rs. 600 crore reserved
Category III – Rs. 710.68 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,165.73 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,939.57 crore as against total issue size of Rs. 3,000 crore
Hi Shiv
As on to-day in Category I only Rs. 435.18 crore filled against Rs. 450 crore reserved.
And I am only able to apply in Category II which is oversubscribed by Rs.27.76 crore.
As on to-day Category I , III , and IV are still open.[ Not fully subscribed] If i apply to-morrow in Category II , do you think i get the full allotment in that ?
Hi Paresh,
It is a very tricky subscription data for the Category II investors to get 100% allotment. There is a high probability that you’ll get full allotment, but I cannot assure you of the same.
Also, as requested earlier also, please avoid such kind of queries here on this forum. You can avail of our services for such queries.
Day 21 (January 7) subscription figures:
Category I – Rs. 435.18 crore as against Rs. 450 crore reserved
Category II – Rs. 627.76 crore as against Rs. 600 crore reserved
Category III – Rs. 682.64 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,143.70 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,889.28 crore as against total issue size of Rs. 3,000 crore
Hi Shiv,
I have a query about Tax free bonds applied through ASBA. I am expecting 50000 to be refunded from NHB and my current balance in account is also 50000. While i have applied for 1 lac rs IIFCL bonds, so if NHB dont refunds before the date IIFCL block the amount in bank would my order get cancelled or a 50000 rs IIFCL bonds would block 50000 only and later issue me 50000 bonds on allotment date ?
Hi Rahul,
I don’t think you can re-use the blocked amount of Rs. 50,000 you used for NHB. As you have only Rs. 50,000 in your bank account at present, you can use only that for your IIFCL application. This is what my understanding is about ASBA.
Hi Shiv,
I think i was not clear. Total amount in my bank is Rs 250000 and i have placed NHB Rs 200000 order, so 200000 is blocked for NHB bonds and as you said in NHB blog that NHB would give 75% allocation on order placed if we have applied on 30th Dec. So I have placed Rs 100000 IIFCL order assuming Rs 50000 would get unblocked + Rs 50000 is free amount in my bank. So my question is Rs 100000 order would get canceled if NHB didn’t unblock the Rs 50000 or IIFCL only block Rs 50000 for my Rs 100000 order ?
Hi Rahul,
Your query was clear to me and I answered your query considering this only. Also, I assumed that you are using online ASBA facility provided by your bank to apply for bonds in these issues.
But, if you’ve used physical application form for this, I think your bank would reject your application as Rs. 2 lakh is already blocked for NHB and your bank won’t allow you to get Rs. 3 lakh blocked when there is only Rs. 2.5 lakh balance is available.
Day 20 (January 6) subscription figures:
Category I – Rs. 435.18 crore as against Rs. 450 crore reserved
Category II – Rs. 626.73 crore as against Rs. 600 crore reserved
Category III – Rs. 668.33 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,114.69 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,844.92 crore as against total issue size of Rs. 3,000 crore
Day 19 (January 3) subscription figures:
Category I – Rs. 435.18 crore as against Rs. 450 crore reserved
Category II – Rs. 624.33 crore as against Rs. 600 crore reserved
Category III – Rs. 650.35 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,074.10 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,783.96 crore as against total issue size of Rs. 3,000 crore
Thanks for daily numbers, it is really helpful.
Would you advise for this bond now or are we still expecting more bonds being launched with rate of around 9% this year?
Will I get full allotment for category 4 if I apply on Monday?
Hi Akhilesh,
I don’t know what would be the rate of interest with the NHAI bonds, so I’ll be able to take a call only after that. I am not sure whether this issue will remain open till that time or not. Let’s see.
If you apply for these bonds on Monday under Category IV, you’ll get full allotment.
Akhilesh, The coupon rates of NHAI will not be higher than this. If you are only waiting for coupon rates and otherwise fine with any of the two, please go ahead. Looking at the TFB issues in last 2 years, I am quite sure about it. Particularly 10 year coupon rates of IIFCL is good. More over NHAI will be having only 10 and 15 Years terms.
Thanks Shiv & George for your valuable suggestions.
You are welcome Akhilesh!
The NHAI Tax free bonds are trading at reasonable price today? Do you have any update on coupon rates for new issue. The sudden interest in old bond gives me an impression that the coupon rates will not be all that high.
Hi George,
NHAI N2 bonds are trading at a yield of 8.54% as of today, which is close to 8.65% p.a. IRFC is offering to the retail investors and higher than 8.40% p.a. for non-retail investors. So, I think it is trading more or less at a fair value.
I have no idea what would be the rates for its new issue but I agree with you that it seems the rates would be lower.
Yes I agree. 15 years NHAI was trading on par with IRFC rates. Both 10 years and 15 Years went up by 1 %. It is also true that NHAI & PFC first issue have the advantage that Non-retail customers also benefit because of no step down here. I also observed that the prediction on GSec and the interest for the same upswing which also brought more interest for the bonds. I expect NHAI to be on par with IRFC.
Day 18 (January 2) subscription figures:
Category I – Rs. 435.18 crore as against Rs. 450 crore reserved
Category II – Rs. 624.33 crore as against Rs. 600 crore reserved
Category III – Rs. 643 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,054.65 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,757.16 crore as against total issue size of Rs. 3,000 crore
Hi Shiv,
Can you please put today’s figures? I could not apply for IIFCL as I didn’t have money. Later when money came I found NHB issue more interesting and then waiting for NHAI issue to judge on what is to be done with remaining money. After IRFC I feel that I should not count on NHAI TBF and apply for IIFCL before Friday. Can you please do this favour to me?
Btw the Book review by Manshu is good. Please keep posting such articles when there is no new NCD or TBF issue, so that we as reader will have our food following onemint.
Thanks, Pinaki
Hi Pinaki,
I have been updating the subscription figures regularly on the 2nd page of this post, you can check those updates by clicking on “Next Comments”.
Also, we try to keep covering some good topics whenever we are able to. Manshu has been doing this great job for so many years now and I joined him only in May-June 2012. I am taking a small break due to exhaustion and some renovation work at my place.
We are committed to keep covering topics which interest our readers and also those topics which are suggested by them. If you have any suggestions, please post them here – http://www.onemint.com/suggest-a-topic/
Please post today’s subscription numbers…
Hi Shiv,
It is mentioned that NRIs are now allowed to invest in the IIFCL. I have just re-located abroad so I would not be an NRI in the current FY (2013-14).
However, I would be one in the next FY.
Are there are other issuers who allow NRIs to invest in these infrastructure bonds?
Hi Ashwin,
HUDCO and IRFC both allow NRIs to invest in their tax-free bond issues. HUDCO issue is closing tomorrow and IRFC issue is getting opened from Monday.
Thanks a lot, Shiv.
Can we expect tax free bonds from various issuers all through the year (2014) or will they taper off?
I think most of the issues have already hit the streets, very few have left, but still I think more issues are expected at least till January end.
Day 17 (January 1) subscription figures:
Category I – Rs. 435.18 crore as against Rs. 450 crore reserved
Category II – Rs. 624.33 crore as against Rs. 600 crore reserved
Category III – Rs. 629.80 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,037.79 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,727.09 crore as against total issue size of Rs. 3,000 crore
Day 16 (December 31) subscription figures:
Category I – Rs. 435.18 crore as against Rs. 450 crore reserved
Category II – Rs. 624.26 crore as against Rs. 600 crore reserved
Category III – Rs. 626.55 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,022.73 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,708.72 crore as against total issue size of Rs. 3,000 crore
Todays numbers please 🙂
Today’s subscription numbers please…
Day 15 (December 30) subscription figures:
Category I – Rs. 435.18 crore as against Rs. 450 crore reserved
Category II – Rs. 624.11 crore as against Rs. 600 crore reserved
Category III – Rs. 617.15 crore as against Rs. 750 crore reserved
Category IV – Rs. 1,002.88 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,679.32 crore as against total issue size of Rs. 3,000 crore
Day 14 (December 27) subscription figures:
Category I – Rs. 435.18 crore as against Rs. 450 crore reserved
Category II – Rs. 614 crore as against Rs. 600 crore reserved
Category III – Rs. 621.21 crore as against Rs. 750 crore reserved
Category IV – Rs. 984.48 crore as against Rs. 1,200 crore reserved
Total Subscription – Rs. 2,654.86 crore as against total issue size of Rs. 3,000 crore
Thank you so much, really appreciate your help.
You are welcome!
Hi Shiv,
Sometime ago you agreed to write a post detailing the interest payment dates of recent TFB issues. Just wanted to ask you can you do this now?
Hi Ikjot,
I’ve already completed 70% work on this post, will post it in the first week of January.
Sir,
It would be better to have a single link for this and you can keep updating this when new issue comes up. We can boomark this page for our reference. Is this fesiable ? 🙂
Sure, I’ve already planned to just keep updating the table for this post.