Investments

National Housing Bank (NHB) 9.01% Tax Free Bonds

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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 protected]

National Housing Bank (NHB), a wholly-owned subsidiary of the Reserve Bank of India (RBI) and the regulator of the housing finance companies (HFCs) in India, will be coming out with its issue of tax free bonds from the coming Monday, 30th of December.

The good news is that the company is going to offer 9.01% per annum for the 20-year option and 8.88% per annum for the 15-year option, which is the highest rate of interest any ‘AAA’ rated issue has carried till date.

Though the issue is scheduled to remain open for the whole of next month to close on January 31st, 2014, the company reserves the right to close it earlier as well in case the issue gets oversubscribed anytime before the due date.

Size of the Issue – NHB is authorised to issue tax free bonds worth Rs. 3,000 crore this financial year, out of which it has already raised Rs. 900 crore through a private placement carried out on August 30th, 2013. NHB plans to raise the remaining Rs. 2,100 crore from this issue, including the green-shoe option to retain oversubscription to the tune of Rs. 1,100 crore.

Rating of the Issue – Being the regulator of the housing finance companies and a wholly-owned subsidiary of the RBI, this issue of NHB has been rated as ‘AAA’ by three credit rating agencies, CRISIL, CARE and ICRA, which is the highest rating by these rating agencies.

Interest Rates on Offer – The company has decided to offer 9.01% p.a. with the 20-year bonds, 8.88% p.a. with the 15-year bonds and 8.51% p.a. with the 10-year bonds. HUDCO is currently offering 9.01% p.a. for 20 years, 8.83% p.a. for 15 years and 8.76% p.a. for 10 years, but that is a ‘AA+’ rated issue. At 9.01% and 8.88%, NHB issue has become the best AAA rated issue for the 20-year and 15-year duration respectively.

If you want to have only AAA rated bonds in your portfolio and do not have more than 10 year investment horizon, then you can still subscribe to the IIFCL bonds which carry 8.66% p.a. interest rate for 10 years.

Investor Categories & Allocation Ratio – 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 i.e. Rs. 210 crore is reserved

Category II – Non-Institutional Investors (NIIs) – 25% of the issue i.e. Rs. 525 crore is reserved

Category III – High Net Worth Individuals including HUFs – 25% of the issue i.e. Rs. 525 crore is reserved

Category IV – Resident Indian Individuals including HUFs – 40% of the issue i.e. Rs. 840 crore is reserved

NRI Investment – Non-Resident Indians (NRIs) and Qualified Foreign Investors (QFIs) are not eligible to invest in this issue.

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.

Lock-in Period, Premature Redemption & Listing – There is no lock-in period with these bonds, but at the same time, you cannot redeem these bonds back to the company before their maturity period gets over. In order to encash your investment before maturity, you’ll have to compulsorily sell these bonds on the stock exchange(s) where they have been listed for trading.

The company has decided to get these bonds listed only on the National Stock Exchange (NSE) and has got the necessary in-principle listing approval for the same on December 20, 2013. The company will get these bonds allotted and listed within 12 working days from the closing date of the issue.

Demat/Physical Option – Though it is mandatory to have a demat account to sell/trade these bonds, you can subscribe to them in physical/certificate form as well and keep them till maturity. Interest will still get credited to your respective bank accounts through ECS.

Interest on Application Money & Refund – NHB 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.

Face Value of the bonds & Minimum Investment – NHB is the first company this financial year to keep the face value of its bonds as Rs. 5,000 instead of Rs. 1,000. Considering its face value and minimum application size of one bond, an investor is required to invest at least Rs. 5,000 in this issue.

Interest Payment Date – NHB has not fixed its interest payment date as yet and the first due interest will be paid exactly one year after the deemed date of allotment. As the deemed date of allotment will be fixed once the issue gets closed and before the bonds get listed, I will update this post as and when it gets announced.

Should you invest in this issue?

I would say that one should definitely invest in this issue and I have many reasons to justify my view. Here are some of those reasons:

First, NHB issue is ‘AAA’ rated.

Second, you are going to get 9.01% p.a. and 8.88% p.a. coupon rates which are the best 20-year and 15-year rates offered by any AAA rated or AA+ rated issuer till date.

Third, NHB is a wholly-owned subsidiary of the RBI and I don’t foresee the RBI to ever let its subsidiary default on any such bond issue. Also, NHB is the regulator of the housing finance companies, like RBI is for the banks and SEBI is for the capital markets. I don’t think any government would allow any regulator to default on its payments.

Fourth, it is almost certain that the CPI inflation will start falling from next month onwards. If that materialises, we might have G-Sec yields falling quite sharply.

Fifth, IRFC is the next company to launch its tax-free bonds from January 6 and its coupon rates are lower than that of NHB at 8.48% p.a. for 10 years and 8.65% p.a. for 15 years. It is not going to issue these bonds for 20 years either.

Sixth, there are very few good companies left now to issue tax-free bonds this financial year. REC, PFC, NHPC and NTPC have already raised their quota of authorised amount from the markets. HUDCO is also very close to reach its targeted amount. Only IIFCL, NHAI, IREDA, Airport Authority of India (AAI), Ennore Port and Cochin Ship Yard are now left to issue these bonds and their issue sizes are also very small, except NHAI and IIFCL.

Seventh, it is still not certain whether tax-free bonds would see the light of the day next financial year onwards or not. Like 80CCF infrastructure bonds got stopped getting issued from FY 2012-13 onwards, it is possible that the next government decides to stop extending this budgetary support to all such companies.

Eighth, NTPC issue got listed a few days back and that too at a premium. If an issue with coupon rates lower than the NHB issue can trade at a premium, then it is almost certain that these NHB bonds would also trade at a premium on listing.

Ninth, NHB has reasonably strong fundamentals. It reported profit after tax (PAT) of Rs. 450 crore with total income of Rs. 3,030 crore for the period ended June 30, 2013 as against Rs. 387 crore and Rs. 2,492 crore respectively for the period ended June 30, 2012. Its net interest margin (NIM) also improved to 2.25% during this period as against 2.20% last year.

NHB’s asset quality has also been remarkable. Gross NPAs and Net NPAs remained quite close to zero for the periods ended June 30, 2011 and June 30, 2012. Though its gross NPAs and Net NPAs have jumped to 0.53% and 0.45% respectively in the latest period ending June 30, 2013, this relative poor performance was due to one large project exposure slipping into the NPA category. This large account was worth Rs. 179.60 crore out of its total NPAs of Rs. 180.62 crore.

Why you should not invest in this issue?

If I myself decide not to invest in this issue, I would have only one valid reason for that, higher expected coupon rates in the forthcoming issues. If any of you think that the rates would be higher with NHAI bonds or IIFCL tranche III bonds, then you can probably skip this issue. Personally, I would invest my family’s money in this issue and would also advise my clients to do that.

Application Form of NHB Tax Free Bonds

NHB 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 NHB tax-free bonds, you can contact me at +919811797407

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344 thoughts on “National Housing Bank (NHB) 9.01% Tax Free Bonds”

  1. Hi Shiv, excellent analysis as always.

    With your 9-star recommendations, this issue is likely to be fully subscribed soon.

    Well how many days maximum, you think it will allow us , to apply and still get full allotment?

    Reply

    1. Thanks Mr. Ramesh !!

      I am not sure how many days it will take for the issue to get oversubscribed, it all depends on the first day subscription by the institutional and corporate investors. I think it should take at least 2 days for the retail investor category to get oversubscribed though.

      Reply

  2. Good Analysis Shiv! I appreciate your 9 reasons for investing. As a 10th one, I will say this is the only bond from a bank which can further diversify the portfolio. As you rightly pointed out, the chances of interest rate for TF bonds going up is minimum considering the fact that no company can offer interest more than that they can get by lending. Banks already reduce lending rates for housing loans which is in the range of 10-10.5%. If NHB lends to these banks and banks themselves are giving loan at 10.5% , where is the opportunity for further increase. Even if the Government securities goes up, it is not mandatory for the TF bond to be higher. Government tried to control the upper limit of the coupon and not the lower limit. It is quite clear that this will be the best opportunity for TF investors.

    Reply

    1. Thanks George !! I agree to most of your thoughts George !!

      High inflation is a genuine problem and the RBI is doing its best to control it. It is not that the inflation and interest rates cannot move higher from these levels. People in the metro cities & some rural areas are earning good money and are spending it like there is no tomorrow. We are nowhere closer to the western world, but we are better off than earlier.

      I think the government is not playing its required role and it has already started seeing the results of it. Now, it is our responsibility to do justice with our money, our economy and our country. I think we should not waste our natural resources and limit our discretionary expenses. I am quite confident that the interest rates would move lower in a few months time.

      Reply

  3. Sir,
    I think the Interest payment date has already been fixed in this case. You may please refer the page 26 of the application form. It is 7th February every year.

    May I please request you to clarify?

    Thanks very much.

    Reply

    1. Hi Shub,

      Thanks for noticing and pointing it out Shub! But actually February 7 as the interest payment date is just an illustrative example. It as as per the Deemed Date of Allotment which has been assumed to be February 7, 2014. It was perfectly natural for you to get confused.

      Reply

  4. Thanks Shiv for the wonderful article!
    As others, I also enjoyed reading your 9 point positive feedback on this issue.
    One feedback – there seems to be a typo in Category I limit – I think it should be 210 instead of 175.
    One question – when you say you will invest “family’s money” what do you actually mean? And why you are not planning to invest your own money? 🙂

    Reply

    1. Thanks Amlan for your kind words and also for pointing out the typo !! I have corrected it now.

      I’ll give honest answer to your question. My family means me, my parents, my brother, my sister-in-law and their two kids and my family’s money means our money. I do not earn big money, but whatever I earn, I invest that in my business and riskier investments like equities. I invest my family’s money in safer products as per their risk profile and asset allocation.

      I hope it satisfies your query!

      Reply

  5. Dear Shiv,
    Excellent Analysis as usual. If a person does not want to invest for long term, but only wants to benefit from lowering of interest rates by RBI (due to fall in inflation) in future, which is better option : Long-Term Gilt mutual funds or tax-free bonds ?
    Thanks

    Reply

    1. Thanks TCB !!

      I think Gilt mutual funds with high duration portfolio would be a better option. It will have great liquidity also. But, if the fund manager has an opposite view as the investor’s and his/her view turns out to be incorrect, then it will be very painful for the investor.

      Reply

  8. Great analysis, thanks much.

    Quick question. Do you think once G-Sec yield starts sliding down, some of the previous TF bonds can be sold at buy price at least? e.g.
    HUDCO 8.39% 10 Y
    REC 8.71% 15 Y
    IIFCL 8.75% 20 Y

    Reply

    1. Absolutely, you would be able to even earn capital gains with your current investments. If the G-Sec rates fall to 7% or so, you’ll have great gains in your current portfolio and even greater gains with these NHB bonds.

      Reply

  9. Hi Shiv,

    Thanks for your excellent recommendation on NHB bonds.

    Wanted to check if you know of any online portfolio manager where you can track the trading volumes and LTP of the tax free bonds listed on the NSE and BSE issued in the last 3 years in one place. While individual prices are available on NSE/BSE, I could not find any portfolio manager for the same. Any suggestions shall be appreciated.

    Reply

  10. Hi Shiv,

    I was holding on my last piece of funds for a good TFB, but looking at the IRFC’s rates and noticing that IIFCL was inching towards closure… I applied for IIFCL a couple of days back. But, as a pleasant surprise NHB has come up with great rates, which I would like to invest (even more after reading your 9-point recommendation 🙂 )… Is it possible to withdraw the IIFCL application? I’ve applied thru online trading account of R-Money.

    Regards,
    CVS

    Reply

      1. Note that you wont get refund amount immediately if ur broker already filed ur application, it will be refunded after allotment happens (atleast thats what happened to me with Kotak online).

        Reply

        2. It also depends on how you apply. If the application is using ASBA, the block is released on the same day (ie you can use the same fund for applying somewhere else). I have already done this 2-3 times using my HDFC Sec online system.

          Reply

  11. As always, a thorough and structured analysis by Mr. Kukreja. Your site has indeed become indispensable to the many lost wanderers on the net looking for actionable information in the bond space. Thanks once more for your wonderful work.

    Reply

  14. Thanks for your excellant report given above.
    i want to invest 20 lacs in NHB for long term ( 2 applications )

    Where can i find / what is current G sec rates ?
    In How many years G-Sec rates expected to fall to 7% ?
    what % of gain can be expected in this issue of NHB (9.01 -20 years) if it falls to 7 % ?

    where can i get forms to apply ?

    Reply

    1. Thanks Rohit !!

      1. Here is the link to check the G-Sec rates – https://www.ccilindia.com/OMHome.aspx
      2. Only God knows how much time it will take G-Sec rates to fall to 7%. It can happen in 3 months time or it might take 5 years for the same.
      3. I am not sure exactly what would be the percentage gain if the G-Sec yield falls to 7%, but I think it should be approximately 15-25%.

      Reply

        1. No Rohit, that’s not correct. All these are different securities with different rate of interest (coupon rate) and different maturity periods.

          Consider this: 8.83 GS 2023 – It is a 10-year Government Security (G-Sec) maturing in 2023 carrying 8.83% rate of interest payable half-yearly.

          Reply

  15. Hi Shiv!

    In point 2 of the form, can you kindly confirm the sub-category code for Category IV investors. Usually its 41, but I was reading the prospectus & couldn’t find it. Could you also tell me where exactly is it mentioned?

    Also, it has been mentioned in the prospectus in bold letters that “Checks without the nine digit MICR code are liable to be rejected”. My check doesn’t have the code mentioned on it. Neither have I ever come across such an instruction in any prospectus before. Does it mean I cannot apply for this issue? Can you kindly clarify on the same.

    Reply

    1. Hi Simple,

      Sub-category would be ’41’ in this issue as always. Please check this link and type 41, you’ll get the required info – http://www.akstockmart.com/akintra/Upload_DnLoad/72_EXTRA.pdf

      I am listening it for the first time that a cheque leaf is not carrying MICR number. I am not doubting what you are saying, but check this link before we discuss it any further.
      http://4.bp.blogspot.com/_Ht1_rh8kGYQ/TUqNxRK_eNI/AAAAAAAADcs/zavpCZj3nAk/s1600/IFSC+and+MICR+Code+in+check.PNG

      Reply

  16. Hi Shiv,
    I am a regular reader of your posts though this is the first time I need to ask a question.
    Currently I have my money lying in at 9% FDs maturing in 2016. It’s been a year since the money is locked in these FDs. I want to get out of these FDs for tax reasons and want to put it in these TFBs. Mainly looking for a 15 year option of NHB. Would you recommend me to do that?

    Also, do we need a Demat account to hold these bonds in electronic form? or will the HDFC ISA or ICICI invest@ease platform suffice? Also, if I go for physical bonds for now, will I be able to convert them into demat form once I open a demat account later?

    Thanks for advance alert on NHB.

    – Sanjiv

    Reply

    1. Hi Mr. Sanjiv,

      Sorry to say, but I won’t be able to take any personal queries here on this forum.

      To invest in these bonds, either you need to have a demat account or you’ll subscribe for it in a physical/certificate form. I am not sure how HDFC ISA or ICICI invest@ease platform work and if they provide this service, whether it would go into your demat account or the bonds will be issued in physical form.

      Yes, if you go for physical bonds now, you can get them converted into demat form later whenever you open a demat account.

      Reply

      1. Thanks very much Shiv for a prompt answer.
        I do not think that the first of the question is a personal query. I guess there would be so many people like me who may have got their money locked in FDs, so the answer will benefit them all. Anyways, it is your choice to answer it or not. Thanks again.

        Reply

        2. I may add this to your query. I have personally withdrawn my premature FD’s of 9.25% rate to invest in these TFB’s and think they are much better option than FD with no TDS and chances of capital appreciation with no liquidity issues so I think it’s a no brainer.

          Reply

        3. Sanjiv, While you are taking a decision on breaking the FD, you need to look at your financial position. Do not break all FDs considering that return is tax free and there is opportunity for capital gain. Look at the amount which you can consider blocked long term and break those FDs and invest. The liquidity will be an issue if the price goes down. I definitely would not like to sell the bond below the face value. If I have to sell the TF bonds, I should get my interest for the period and some premium. Probably this is the reason why Shiv also refused to comment. When I took that decision to break my FDs, I consider a percentage of the amount which I can allow blocking unless and otherwise real emergency occurs.

          Reply

  17. Hi Shiv,
    As usual very thoughly researched analsysis. Thank you. Now I have to look around for funds and that too need to get in next 2 days. Quite challenging. I have one question, I have a demat account. In the past. I bought all the tax free bonds using paper/physical certificate. Then I am in the process of converting to electronic form. How can I invest using demat account? I am assuming if I invest thru demat account, then it will be in electronic form instead of physical ; so no need to do the conversion.
    Please let me know. Thanks,

    Regards,
    Sundar.

    Reply

  18. Truely informative and an excellent writeup. You get to know all the details about the issue by reading this post.

    Reply

  20. Shiv – you’ve said:
    * Fourth, it is almost certain that the CPI inflation will start falling from next month onwards. If that materialises, we might have G-Sec yields falling quite sharply.

    This would make G-secs attractive, if newer instruments offer smaller coupon rates, older higher-coupon rates demand will go up. Mutual funds with this strategy would make good investment.

    But will inflation tame? From Rajan’s Dec 18 speech, it seemed he’d like to wait longer, reviewing results of previous actions, before increasing repo rate.

    Can you share more on your view of CPI? Or maybe do a post on it?

    Thanks for excellent content.

    Reply

    1. Yes, you are right about investing in Gilt (G-Sec) mutual funds. Investment in these tax-free bonds also will result in capital appreciation if rates fall anytime in future.

      Dr. Rajan expects the inflation to fall in the coming months, that is why he did not increase the rates on December 18. But, if it does not materialise, then we’ll see another rate hike and G-Sec yields move up.

      I think the CPI inflation should fall, but how & when, only God knows. I’ll try to do a post on the same sometime next month.

      Thanks for your kind words!

      Reply

  21. Which form I should download NHB 13-14 (23/12196 – 36) or 13-14(01/121) ? I am in Bangalore, where can I submit the form for bidding in south Bangalore Jayanagar/JP Nagar? What documents do we need to attach with the form?

    Reply

    1. You can download any form, it doesn’t make any difference. You can mail me the duly filled form for bidding on my email id – [email protected]

      You need to attach the following documents for submission:

      * Self-attested PAN card copy
      * Self-attested Address Proof copy
      * 2 Cheques – 1 Investment Cheque and 1 Cancelled Cheque

      Reply

  22. You have been consistently wrong in predicting the yields of the various tax free bonds. When REC launched its issue with the 20yr yield @ 8.71%, you proudly claimed that this will be the highest this year (you can read your own posts for reference, in case you have forgotten).

    Then PFC issued its 20yr @ 8.91% and again you said it will be the highest. You were proved wrong again as NTPC came out with its issue. Although the yield was the same, yet the company was far superior as evidenced from the fact that the bond got fully subscribed in less than 2 days.

    Now again you have gone to town claiming that this is the best ever & have even gone to the extent of giving it a 9 star recommendation!

    Point 4 mentioned by you is completely wrong & very misguiding to viewers. While it is a given that CPI will fall, but by how much do you expect it to fall? Even the most optimistic person wont expect it to fall by more than 100-150bps. The G-sec is at 8.88. That is a very very big difference between the CPI & G-sec. Don’t forget that this fall in CPI will be just a temporary phenomenon just as the spike was temporary (due to cyclones hitting the east coast). CPI has shown no signs of relenting otherwise.

    Point 7 is again fear mongering and very very presumptuous. With GDP well below 5%, it would take a very brave govt to ban tax free bonds. Some may argue that banning the 80 CCF, is also a contributing factor to the mess we find ourselves in

    While I don’t have a problem with you being repeatedly wrong, my only advice to you will be to stop making wildly inaccurate guesses and assumptions. A lot of people must have blindly followed your advice and got trapped in the above mentioned issues. Thankfully I am not one of them. All the bonds mentioned above are trading in the red (even after factoring in the interest premium that builds up over time).

    You owe an apology to all the viewers of this forum

    The US yields have touched 3 & as QE tapering intensifies, you will see a flight of capital from the debt market. It is inevitable. You will see higher yields on upcoming bond issues, you can mark my words. The bond issues will not stop, neither will CPI soften.

    I am not going to apply in these bonds either, as I expect better yields & will look to buy the bonds which have already listed at prices far lower than their issue price.

    To anyone interested, my father is an economist and holds a very high post. Most of the above are his views and I fully agree. Sound counter arguments and criticism is welcome

    Reply

    1. Hi Sam,

      You are talking rubbish here as I never claimed that REC 8.71% rates would be the highest this year. Here is the link, you can very well check it: https://www.onemint.com/2013/08/28/rec-8-71-tax-free-bonds-issue-august-2013/

      I claimed it for PFC 8.92% and the rate were higher than NTPC’s 8.91%, despite of the fact I was actually wrong in my assessment. As incorrectly stated by you, how can you claim that NTPC issue was far superior than PFC? Just go and check the market prices of these bonds – PFC 8.92% bonds closed today at Rs. 1009.75 and NTPC 8.91% bonds closed at Rs. 1,005. So, which is better?? There was huge demand for NTPC bonds bcoz it was the first such issue from NTPC and the issue size was smaller.

      I did not come to your place and claimed that NHB issue is the best one and I never claimed that I am giving it 9-stars. I just used 9 points to express my views.

      Can you tell me precisely what would be the CPI inflation next month or two years later ??? If you think that CPI inflation will go higher & higher, then why don’t you invest in IINSS ?? All your thoughts above are laughable. I don’t know why I’m responding to you, but I don’t want to listen to your rubbish claims. I am writing to the best of my abilities and very very honestly. I don’t care who you are, I’ll do what I want and you’ve no right to stop me from that.

      Reply

      1. Have nothing but pity for people like you. “I don’t care who you are, I’ll do what I want and you’ve no right to stop me from that”… you sound like a teenager going through puberty rather than a sensible analyst.

        I will respond to 1 point only in the utter trash that you have just posted, PFC listed on 16th November, and if you factor in the interest cost of 244/- per day (8.92% for 10 lacs), it should trade at 1010. That is a loss of 5 rupees per bond.

        Reply

        1. hahaha… ok.. this makes NTPC issue “far superior” and NTPC issue does not earn any interest which should be added to its price ?? That’s great, thanks for your inputs Sam, I am really grateful to you that you enlightened me !!

          Reply

          1. I would advice you to read the balance sheets of PFC & NTPC before commenting. NTPC is the biggest power producer of this country. Or do you think since PFC share price is at 163 & NTPC share price is 137, that makes PFC superior

          2. I reviewed PFC and NHPC bonds and had a view that NHPC bonds were better. Then, I had a view, between NHPC and NTPC, NTPC is a bigger and fundamentally better company. It automatically means NTPC is a better company to invest. I know how to analyse balance sheets and income statements and don’t require your inputs to understand which company is better.

    2. Sam, you yourself mentioned that these are not your opinion and belongs to your father holding a big position. As you know , the PM , FM , RBI Governor, PC Chairman all are renowned economists and not able to predict the economic situation properly. You have commented on the recommendation points by Shiv in this forum which is managed by him. As I understand , Shiv is not an economist and came up with opinion based on his experience and past data as a financial advisor for small investors. Last year this bond were sold initially at 7.5 and Shiv’s blog mentioned that is the best rate offered in the given condition. Some came with further high coupon rates and later on there was bonds which came with less than 7% coupon rates. All of them listed with premium later though the retail bonds had 50 basis points higher. Until August this year also the bond market was at 7 % level and suddenly based on situation of Inflation, fiscal deficit and CAD the rupee went down and the bond coupon rates went higher. Even if the bond goes to 10% or 11% , there is no guarantee that TF bonds will come with high interest rates. You can ignore the recommendations of Shiv and I do not see any reason why he should apologize. I have also learnt economics and track the global economic situation closely. No one is denying the situation of Fed tapering , US Bonds interest rate going up etc. Much will depend on how Indian economic situation and Inflation is going to be. No one can fully and correctly predict the future. Those who are looking for long term benefit from TF bonds, based on current IT rules in India. This is good opportunity. There is no reasons to believe any good TF bonds coming this year other than NHAI which did not reveal the interest rate. We do not know what stand the next government will have on having new TF bonds. There is no free lunch available, all investments carry their own risk. There is nothing wrong in having a contrary view as you have mentioned and I appreciate your view. But , time will tell how the economic plays out. If your view holds Good, investors will have to wait for investing in equity also.

      Reply

      1. Thank you for your reply & understanding. I will just like to clarify regarding your free lunch comment. These bonds are not issued for us retail guys, for our benefit. These are offered as tax breaks by the govt to these companies to spur the economy. We are the unintended beneficiaries of this process

        Reply

        1. To your point regarding the Govt initiating the TF bonds is well known to everyone. It gives opportunity for people to save on tax. Taking the benefit of the situation and helping in nation building both are part of the citizen. There are many investments sites and in this forum Shiv is trying to bring info to those who are not well updated about the opportunities. He is not charging for all this service. Please do not discourage him and the people who are in this forum. All are matured enough to understand the basic finance. Have constructive criticism rather than indulging in I know better attitude and pushing some one who is only trying to share info to an audience who is interested in it.

          Reply

    4. Hi Shiv,
      Leave this Sam alone. It seems he is here just to get some free publicity (ie see his boasting that his “father is an economist and holds a very high post”).
      Regards,

      Reply

  23. hello sam .
    can you guide the viewers which bonds are already listed at prices far lower than their issue price. ? i want to buy on monday instead of applying to NHB 9.1 %

    You , the Viewers and Mr Shiv all on same boat & want to find our best options available in mkt

    Reply

    1. REC 8.71%. Its interest is paid on 1st Dec. Its trading at 996. Assuming a 10 lac application, interest cost is 238/- per day. It should trade at 1006. That is a 10 rupee discount per bond. You can get it at 990, just be patient

      Reply

        1. YTM % at LTP of REC is 8.8. No need to act smart, both the exchanges do the job of informing the investors perfectly well. Do you want the link to those as well?

          But I don’t misguide people like you do just to earn a commission. Nothing wrong with earning money, but the way you do it is reprehensible

          Grow up Mr. Shiv Kukreja and learn a little humility as well. I will not indulge in these puerile exchanges with you any further

          Reply

          1. hahaha… I have all the links Sam and probably more than you. I just wanted to check how much you know. So, you want people to go for 8.8% yield and pay 1% brokerage on that ??

            I am not acting smart and I am what I am, you need not tell me what to learn and what not. I don’t need to learn anything from you. It is bcoz of people like you, this advisory business has become a mess.

          2. I still didn’t get it. Why are you suggesting to buy REC 8.71% whose YTM is 8.8% v/s buying NHB whose coupon is 9.01%.

          3. Sam – Please just state facts and not opinions on someone you don’t know fully.

            Try buying 1 lakh worth of bonds from the markets. The price will shoot off immediately. I agree Shiv and all of us infact have been wrong and that interest rates have gone up. But I don’t regret my investments made in tax free bond last year. With hindsight I could have waited for 9% but who knew that two or one year back. I will continue to invest in tax-free bonds.

            Stop bragging that your father holds a “high post”. The US Fed “high post” economists could not see the subprime housing meltdown. Economy is not a complete science.

          4. Leave it Bhaskar, there is no point arguing with such people. They come to destroy a beautiful world and then just vanish. He advises people to buy a bond which is yielding 8.8% and pay brokerage of 0.5-1% and blames others to misguide investors here.

            I agree with you that we have been wrong in predicting the interest rates, inflation, CAD & Fiscal Deficit but nobody has been able to either, neither our Finance Minister nor the RBI Governors. We are nothing in front of them. We can only hope it falls as soon as possible. How can Sam or anybody else in this world predict what would be the inflation or G-Sec yield 3 months, 6 months, 2 years, 5 years down the line.

            These people have nothing to do but to mentally disturb others.

  24. i am not a genius like you Sam , nothing close to Shiv , but still i can make out
    why i should not buy REC 8.71% on monday even if it trade at 990 … reason behind if i am getting 9.01 i.e 0.30 % per year higher then 8.71 = 6 % lesser in 20 years. i can buy REC at 940 to match up with NHB . instead of arguments & blaming each other why not help each
    other with own views … there is no compulsion to accept views of any reader or views of Shiv. we are all on same boat and want best returns on our hard earned money … so instead of fighting start thanking each other for encouragement of one & all.

    Reply

    1. Absolutely, there is no compulsion to accept my views or any reader’s views out here. In fact, I avoid giving advice here and would like to provide only general info.

      I agree with you Rohit that there is no point going for bonds trading in the secondary markets until the yield is far superior than the new bonds on offer.

      Reply

  25. Hi Shiv,
    Very good detailed analysis.

    If you were to choose either of 15 yr or 20 yr, for capital gain + liquidity (after waiting for interest rates to fall ), which one is better ?

    Reply

        1. I have no idea what would be the rates in the upcoming bond issues Pradeep. Also, I never said that I am sure liquidity would be higher with the 20 year bonds. I just said I would prefer the 20 year bonds overall.

          Reply

  26. I apply for the bonds jointly with my wife who is 64 years old. Keeping our age in view, we have so far only applied for bonds with 10 years duration. We are now tempted to apply for NHB bonds for a duration of 15 years. There is a view that one can apply for a longer duration because one can always liquidate the bonds in the market. My experience is that the liquidity is very limited and it may be difficult to sell the bonds in the open market. Should we therefore stick with 10 years or go in for 15 years this time.

    Reply

      1. Thank you very much for your prompt reply.

        I urge all readers to appreciate the fact that Shiv is doing a great job in providing us with valuable inputs . I have had the opportunity to interact with many wealth managers and I can say that Shiv is any day more knowledgeable than then. We are all mature people and it is for us to take or leave his advice.

        Reply

  27. @Sam. Sam , as Rohit said, we all here have one goal as how to make our money work harder. So, let us all benefit each other by our collective views and info. We wouldn’t like an informed reader/contributor leaving this blog and I guess Shiv too won’t mind you staying here. So let us all use our time wisely and keep making this blog more valuable, and please keep posting.

    Reply

  28. My first exposure and very informative indeed. Certainly facilitates decision – making.

    Personally I was happy to read the dissenting views as well . Only if we can avoid getting personal please.

    Reply

  30. Hey Shiv,

    I have a question. If a person applies for this bond, and within few months becomes an NRI. Then can he still redeem this bond upto maturity, or sell in secondary markets.
    I understand that once a person becomes NRI, he may at his will later, need to convert his bank accounts to NRI accounts, so how will the demat portfolio be affected?
    The reason I am asking above is, this bond is not for NRIs, however I may be an NRI in future, and get my demat account modified with NRI option.

    Suggestions/Comments welcome

    Reply

    1. Hi Prash,

      Even I am not sure about it. The government allows PPF accountholders, who subsequently become NRIs, to continue their investments till it matures. But no such guidelines are there for these bonds.

      But, one thing is for sure, it is mandatory to convert your bank account(s) to NRO bank accounts and your resident demat account has to be mandatorily closed and a new demat account has to be opened with NRI status. If somebody is expecting to become NRI in the near future, then I think it is probably better to apply for these bonds in physical form.

      If somebody has any more info, please share it share.

      Reply

      2. Hi Shiv,

        Exactly a similar question here. What are the problems expected if one applies through a resident demat account and later the status of the applicant changes to NRI (and assuming the demat account continues to be domestic and not converted to non-resident)?

        Do you expect any problems in the interim or at the time of redemption?

        Reply

  31. Dear Shiv,
    Tax-free bonds of NTPC are quoting below those of NHPC & even PFC. Is it due to later allotment date of NTPC (and therefore lower interest component in the price) or due to some other reason ?

    Is it advisable sell NTPC, NHPC & PFC bonds to invest in NHB, considering long-term investment ?
    Thanks

    Reply

    1. Dear Shiv,
      Please consider fundamentals of the issuer also, in addition to other relevant points, while answering my second question above.
      Thanks

      Reply

      1. Dear TCB,

        Yes, it is due to the accrued interest which is attached to their prices. Also, demand is more for the NHPC & NTPC bonds as compared to the PFC bonds. So, that is also one more reason.

        I would not like to take a call on your second query. Personally, I sold my family’s NHPC bonds within 5-10 days after they got listed between Rs. 1,016 & Rs. 1,028. I am going to invest that money in the NHB Bonds now.

        Reply

  32. Hi Shiv,

    For tax free bonds, what is the criteria for High Net Worth Individuals ? If I invest 1 lakh will I be treated as HNI and get lower returns? I am new to this investing world.. Sorry if my question sounds silly.

    Reply

    1. Hi Praveen,

      Individual investors who invest more than Rs. 10 lakhs in tax free bonds are categorised as High Net Worth Individuals (HNIs). Nothing silly here, we all learn like that only.

      Reply

  33. Thanks Shiv for the excellent article. NHB interest rates was a very pleasant surprise for me especially when IRFC rates were known. I do think this will be the best interest rate for AAA TFB paper in this FY.

    This issue should get fully subscribed by tomorrow evening. It will be interesting to see if withdrawals are seen in IIFCL and HUDCO susbscription to apply for NHB.

    Regards
    Ramadas

    Reply

    1. Ya, let’s see how this issue goes. I have observed that the investors normally don’t withdraw their applications in a large number after they submit it. It would be interesting to see what happens with these issues.

      Reply

  34. The issue is getting huge response and is already oversubscribed. The retail portion is still open (ie Rs 500 cr collected compared to the reserved value of Rs 840 cr), but the same may also get over by today itself.

    Reply

  35. Those who wanted higher coupons and waiting for future issues, the NHB issue will mostly close before the end of day. It already surpassed the maximum limit and retail investors still have a chance in next 1 hour for 100% allotment.

    Reply

    1. Oversubscribed as in the whole issue or the category-wise ? Meaning if the other categories and the issue is oversubscribed today but retail is not subscribed 100 % , then all the retails applications today get 100% allotment right ?

      Reply

      2. Right now it crossed 100% for over all subscription. Retail is at 1.1 Million bonds and it can go upto 1.68 Million. Considering that we have another 3 hours , this should be achieved and I think all those retail investors applying today will get 100%. Once again the issue is getting closed on merit and not because of the publicity. Shiv and this forum was correct in assuming that the issue will have high interest. Getting 2100 crore investment in a day is not a joke.

        Reply

      3. That is right.

        May be the retail guys who has already put money here should do some prayers so that the retail portion doesn’t get oversubscribed by today itself 🙂

        Reply

        1. Even if it gets oversubscribed, it will be few percentage above subscription level. Retail investor will still get anywhere between 95 & 100%. Let more people participate , even if we get few bonds less.

          Reply

    2. Thanks for the clarification. The retail subscription is currently at 1.3 Million bonds and the maximum retail is 1.68 Million. We have another 2.5 hours and I feel 100% subscription today itself and all those applied today is likely to get 100%. Though it reached 100%, issue might close tomorrow.

      Reply

      1. Thank you all for sharing the info.
        I will join the prayer for 100% allocation for those applied on the 1st day (today)!
        Is there a way to know what is the distribution amongst 10/15/20 year bonds under retail category?

        Reply

  38. Retail will be oversubscribed today itself. It is already 95% subscribed. It should end up 105%-110% oversubscription for retail going by the pace of subscription by end of today. I cant believe 800 crore of retail money is available to be raised in a day. This is no doubt the best TFB till date.

    For those who applied today will have to settle for 90-95% allotment. Let us wait for final subscription numbers by end of the day

    Regards
    Ramadas

    Reply

      1. Shiv, I would expect it to be 900 crore. If Sam is still having a look at this forum. I want him to know that all the comments here are based on better understanding of TF market and merit of bonds issued. The forum helps in getting info in time and not losing opportunities. You can always have 2 opinions on one subject. But the one who invests will have to take final call based on the opportunity available and what he is comfortable with. No one takes financial decisions based on one recommendation. Continue to debate for and against without finger pointing.

        Reply

  39. At 3:30 p.m., issue has been subscribed thrice the base limit and fully subscribed in individual categories as well and that too upto the proportionate shelf limit in each (total=2100 crores). It seems sure that none will get the full allotment of application.However, feeling good for the time being that let go very prompting issues such as PFC, then NHPC and NTPC. Finally have put in good share of portfolio in this issue under retail for 20 years.

    Reply

      1. This must be some sort of history that this TFB issue is creating !!!!
        Shiv – just to get a perspective, if retail is say 1000 Cr today EOD, approximately what % allotment can we expect ?

        Reply

  43. It is really amazing that we will not get 100% allocation inspite of applying on the very first day!

    Shiv, can you please explain what is “green-shoe option”?

    I read the below in your summary:
    “including the green-shoe option to retain oversubscription to the tune of Rs. 1,100 crore.”

    Reply

    1. Green-Shoe Option – An option which allows the underwriter of a new issue to increase the size of the issue due to high demand for the securities (shares, bonds or NCDs) on offer.

      Reply

  44. At the final subscription of Rs 1139 cr today, against the Rs 840 cr, the allotment for retail guys will be around 74% only.

    Reply

  45. Yes, the retail investors subscription figure finally stands at Rs. 1,139.35 crore and it is really amazing that the issue has received bids worth Rs. 4,366.43 crore as against Rs. 2,100 crore total issue size, including the green-shoe option. This is something others haven’t been to do this financial year.

    HUDCO issue is also offering 9.01% for 20 years and in fact, its 8.76% for the 10-year option is higher than this NHB issue, still the investors got attracted towards this issue and have opened up their lockers for this issue.

    Reply

    1. You were dead right Shiv, when you gave detailed reasons why NHB was the best issue so far. Investors, including me, have preferred NHB over HUDCO but the reason for my preference was that I had already got HUDCO bonds in the first tranche. I also understand that investors were flush with funds because of the end of the year bonus. I hope we get the refund quickly so that we can invest in the IRFC bonds.

      Reply

      1. Huge response for the issue is due to NHB’s first and the only issue this financial year and its attractive interest rates.

        I think you’ll get the refund by January 10th or 13th and I am sure by this time IRFC issue will be open.

        Reply

  46. Day 1 (December 30th) Subscription Figures:

    Category I – Rs. 575 crore as against Rs. 210 crore reserved
    Category II – Rs. 1,461.39 crore as against Rs. 525 crore reserved
    Category III – Rs. 1,190.70 crore as against Rs. 525 crore reserved
    Category IV – Rs. 1,139.35 crore as against Rs. 840 crore reserved
    Total Subscription – Rs. 4,366.43 crore as against total issue size of Rs. 2,100 crore

    Reply

      1. Rs. 840/ Rs. 1,139.35 = 73.73% 🙂

        Some applications will get rejected due to technical rejections, so we can expect approximately 3 bonds for every 4 bonds applied or 150 bonds for every 200 bonds applied.

        Reply

        2. Hey Shiv,

          What does technical rejection mean. Does it mean software error, or incorrect details filled while applying for the application?

          Reply

          1. Hi Prash,

            Please check the prospectus language of NHB issue:

            “The Registrar to the Issue will undertake technical rejections based on the electronic details and the Depository database. In case of any discrepancy between the electronic data and the Depository records, NHB, in consultation with the Designated Stock Exchange, the Lead Managers and the Registrar to the Issue, reserves the right to proceed as per the Depository records or treat such ASBA Application as rejected.”

      1. That is bad news.

        Can you provide the subscription figures for IINSS-C? (Inflation Indexed National Saving Securities-Cumulative)

        Reply

  49. Thanks Shiv. I am fortunate that on Sunday night before going to bed I didn’t miss to read you and could apply for NHB bonds today.
    Unfortunate thing is that more and more retail investors are reading your blog. You are solely responsible for such an interest in NHB. (Not to mention that I am kidding :)).
    I know my application will get partial allocation. My question is if NHB keeps the bond issue open for tomorrow, should I apply more tomorrow? Is there a chance of getting a little from tomorrows application or is it fully FCFS on a per day basis? I mean even if they keep issue open no one from tomorrows applicants will get any (I guess even with possible technical rejection todays subscription is more than 100%)? Kindly reply today only :).

    One more point – I saw exchanges in between Sam and others above, which I feel has lowered the ethos and essence of this forum.
    Contributor like Sam should understand that one with contra-view is welcome by you and others because everyone wants to listen and understand counter perspective. Otherwise, you, yourself, wouldn’t have allowed his view to go public. But what is absolutely wrong is wordings and tone of Sam’s comment of trying to abuse. I feel, better will be that, if you don’t make such comments public unless those are written in right spirit (or remove them if you have set auto accept or just ignore them and don’t reply or reply with no emotion). It is wastage of time for others to read such conversations. After first day’s interest among people I don’t need to say who was very much wrong in his prediction. Even if he is right, provided future TBF rates are higher, I feel I have done right thing to invest in NHB bonds considering present context.
    But one thing caught my eyes is “But I don’t misguide people like you do just to earn a commission.”. It is a serious (perhaps wild) allegation he has put on you. It raises question of conflict of interest and questions your integrity and my trust on this forum. Shiv, I will request you explain how come is that possible that I apply for TBF using my icicidirect account and you get a commission? And let me know is it possible in this world that a Govt organization pays an eminent financial planner to promote their debt market issue on top of another organization? Others can also add their logic in this conspiracy theory.

    Reply

    1. Hi Pinaki,

      I don’t know why I responded to Sam, as I don’t think it was even worth responding. But now I don’t want to take it any further. I am quite tired after writing seven posts in the last ten days, working around 15-16 hours a day, answering almost all the queries here, servicing my clients for these tax-free bonds and answering many unknown/useless calls. I need a break from all these arguments and counter-arguments.

      Healthy counter perspective is most welcome, who minds it, nobody. But, what Sam was trying to do is to unnecessarily blame me for none of my fault. If I had been doing all this just to earn commissions, I would have been promoting all the private NCD issues here. If I am writing posts here and in return I am getting clients for my financial planning, investment planning, tax planning and general investments, then what’s the problem in that? Would you mind it? I have seen people copying our articles, nobody objects to that. Misselling happens in the insurance space and in the investment world, nobody objects to that. If I am earning my bread & butter by blogging and subsequently servicing the clients with my services, what’s the problem in that? Just leave it, no more explanations.

      Answering your query, you won’t get any allotment if you submit your additional application tomorrow. It is FCFS on a per day basis. If you want to earn 5% p.a. interest on your refund application, then probably you can do it tomorrow as well. 🙂

      Reply

      1. Hi Shiv,
        Thanks for such prompt reply.
        I would not mind at all if you win clients as an effect of your honest and arduous effort. I don’t see anything unfair or unethical here.
        I repeat what I wrote earlier, you are doing almost philanthropy on regular basis by helping so many retail investors. Thousands if not lakhs of people like me, who does not have any monetary terms with you till now, are thankful to you. I wish you, prosperity, success in your personal and professional life as well.
        Cheer up !!! have another great year of 2014. Happy New Year in advance.

        Pinaki

        Reply

        1. I have been very very honest in all my responses to the best of my knowledge and abilities Pinaki !! I don’t know how much it has helped people, but Manshu’s & my intentions are very clear – to help people learn about the financial world and facilitate them choosing & investing in the best investment options. Rest God is there to help everybody !!

          Also, thanks a lot for all your wishes and compliments Pinaki !! You too have a happy, prosperous and wonderful year ahead !! 🙂

          May God give us more honest leaders in 2014 and we too become better persons in our day-to-day lives !!

          Reply

  50. In last 3 months I have applied for almost all the TFB issues on day 1 and got 100% allocation hence bit disappointed not to get it this time around. Anyway, now time to do some maths again and decide where to invest the refund.

    Reply

  51. Thanks for such quick reply Shiv. Yes, I do have 15 to 20% of my portfolio in equities and equity related mutual funds. TBH I’ve not had best of experience when it comes to equities in last 3-4 years and best returns which I got was from gold (glad I sold most of it in time). Will def decide investing more into equities once political (after gen elections) and macroeconomic picture becomes more clearer.

    Reply

      1. hmm..Will try and visit you next time when I’m in and around Delhi and get your personalized advice regarding my portfolio.

        Reply

  52. Hi Shiv,

    Thanks a lot for the detailed replies. Read on twitter today that NHB issue is over-subscribed, had qs on how much will get alloted etc. Was pleasantly surprised to see all this discussion, which i missed out on yesterday 🙁

    So as of now it looks like should get approx. 75% of bonds, and refund by Jan 10th. Now need to check the other issues like IIFCL and HUDCO.

    Thanks again 🙂

    Reply

  53. Hi Shiv,

    I’m also one of silent admirer of your impartial advice. Thanks for your good work.

    I had also applied in NHB issue submitted through my broker last evening. Per him the application was submitted by him before 5 pm yesterday and will have stamp of yesterday. He says lead manager can’t confirm the allotment of 74%. I’m surprised. Can you throw some light on the process of submission. Will NHB deposit my cheque if the application is not received by 5pm yesterday? My broker says in case cheque is not presented within next 2/3 days, like hood of allotment is remote.

    Thanks

    Reply

    1. Thanks Viks for kind words !!

      If the ‘bidding’ of your application on the exchanges happened on 30th of December before 5 p.m., then you’ll get approximately 74% allotment for sure, irrespective of the cheque hitting your bank on Thursday or Friday. Also, your cheque will get presented by the bank for sure, even if your application bid got made by your broker on 30th, 31st or 1st. I think your broker is misguiding you somehow.

      Reply

      1. Shiv, thanks.

        Is there any process to check whether the bid application was applied before 5pm. The acknowledgement slip just the stamp of the broker and no date.

        Regards
        Viks

        Reply

        1. Hi Viks,

          I have no idea how to check it on the exchanges. When I do the bidding for my clients or other investors, I share the bid timing & date with them. I think you should also ask your broker to share his bidding data with you.

          Reply

  54. Hi Shiv

    I see IRFC and NHB filed final prospectus in a span of 4 days and their interest rates vary quite a lot. How was NHB able to offer higher rates than IRFC? I cant figure out such a drastic variaion in govt bonds yields in those 4 days.In fact i was not expecting anything more than 8.71% for 20 years and finally what came was way higher than that at 9.01%

    It is also surprising NHB decided to have one month window with such a small issue and IRFC is over confident of closing such a big issue in 2 weeks?

    Regards
    Ramadas

    Reply

    1. Even I’ve failed to understand this variation Mr. Ramadas and that is why I am not in a position to comment on this.

      All these are board decisions and it depends on what they are targeting. I don’t think IRFC will be able to raise such a big amount till January 20th.

      Reply

    2. IRFC knows that they won’t be able to collect full amount in Tranche 1 and want to come with Tranche 2 soon (ie may they are hoping for better rates at that time). Anyway, they have to collect this huge sum before March 31 ( ie whatever the number of tranches).

      Reply

  55. BSE site now state that the NHB issue will be closed only on tomorrow (1/1/2014). Why are they keep on postponing it when the issue is already oversubscribed?

    Reply

  56. Day 2 (December 31) Subscription Figures:

    Category I – Rs. 575 crore as against Rs. 210 crore reserved
    Category II – Rs. 1,462.61 crore as against Rs. 525 crore reserved
    Category III – Rs. 1,198.35 crore as against Rs. 525 crore reserved
    Category IV – Rs. 1,206.08 crore as against Rs. 840 crore reserved
    Total Subscription – Rs. 4,442.04 crore as against total issue size of Rs. 2,100 crore

    Reply

  57. Hi,

    Should we make the stop payment for the cheque, if the broker failed to bid on the first day and done on the next day? I shall appreciate, if you can suggest, as I do not wish to block money unnecessarily for another 10 days.

    Thanks.

    Reply

      1. Thanks very much Mr Shiv.
        Is there any way to see the status of the application prior to the allotment?
        Regards..

        Reply

  58. Hi Shiv

    NHAI has filed draft prospectus with SEBI on Dec-26 for TFB . Hopefully they will also come up with their issue around mid Jan. NHB would have refunded unallocated amount by then. Looks like both NHAI and IRFC has decided to not opt for 20 year bonds. Hope NHAI throws some surprise like NHB on interest rates

    Regards
    Ramadas

    Reply

    1. Hi,

      Yes, NHAI has filed its draft shelf prospectus on December 27th. It is again surprising that NHAI also is not carrying the 20-year option. Let’s see how soon they launch it and what do they have in store for us. Also, let us hope their rates are not as disappointing as IRFC.

      Reply

  59. Hi Shiv,

    Wish you and your family a very happy and prosperous new year !! one of my biggest achievements in 2013 was discovering OneMint and all of these informative and useful articles.

    When should we expect to get back the NHB refund ?

    Reply

    1. Thanks a lot Aditya for your wishes and your kind words !! I too wish you and your family a very Happy, Healthy & Prosperous New Year !! 🙂

      You can expect NHB refunds to start pouring in either from January 10th or January 13th.

      Reply

  60. Day 3 (January 1) subscription figures:

    Category I – Rs. 575 crore as against Rs. 210 crore reserved
    Category II – Rs. 1,462.86 crore as against Rs. 525 crore reserved
    Category III – Rs. 1,198.35 crore as against Rs. 525 crore reserved
    Category IV – Rs. 1,231.40 crore as against Rs. 840 crore reserved
    Total Subscription – Rs. 4,467.62 crore as against total issue size of Rs. 2,100 crore

    NHB issue stands closed today.

    Reply

  61. Dear Shiv,

    Long-time reader/first time commenter. I would like to wish you and your near and dear ones a happy and joyous new year ahead.

    Please keep up the good work!

    Anirban

    Reply

  63. Hi shiv,

    If we get bonds in physical form, then the annual payout arrives in a form of check by post and manually to be deposited into our bank?
    Or it is still automatically credited in our bank account annually ?

    Just trying to compare whether It is worth to have a demat account and pay maintenance fees,just for holding tax free bonds , which I don’t plan to sell , but just get the interest payout annually without much hassle

    Reply

      1. Thanks Shiv. One more question, how can I apply for physical form, can you guide me for the process and steps needed ?. Couldn’t find much valuable info doing random google search on same.

        Reply

        1. Hi Prash,

          We, at Ojas Capital as a brokerage firm, help investors do it on a PAN India level. Here is the procedure to apply it in the physical form:

          * Download the application form and duly fill it.
          * Mail us the scanned copy of your duly filled form and we’ll do the bidding on the stock exchange, which is mandatory before banking the application form.
          * We’ll let you know the BSE/NSE Bid ID, which you’ll be required to mention in front of the application form numbers.
          * After that you can either courier the form to us, along with your self-attested copies of PAN card, address proof and a cancelled cheque, or directly submit the form/docs at the designated bank branch nearest to your place. We’ll let you know the address of the designated bank branch nearest to your place. If required by you & possible for us, we’ll get the form, docs picked from your place.

          I hope it helps! For any clarification or further info, you can contact me at +91-9811797407 or mail me at [email protected]

          You can get in touch with any of your local brokers also for the same.

          Reply

    1. No info as yet on NHB allotment. I think it is too early to expect NHB’s allotment as it has been only 5 working days since the issue got closed. I am expecting the refund/allotment to happen either on Friday or Monday.

      Reply

      2. Thanks for the quick reply. I was planning to recycle the refund money to IIFCL bonds before it gets closed on Jan 10. That is why I asked.

        Reply

  65. Dear Shiv,
    Is there any way to cross-check whether the broker with whom I have submitted my application has done bidding on NSE/BSE platform or not ?

    On the exchanges, is it possible for retail investor to buy bonds issued to non-retail category and still get higher coupan applicable to retail category for a particular tenure ? e.g. for NHPC and NTPC there are total of six series (N1 to N3 for non-retail and N4 to N6 for retail). Can a retail investor buy bonds from series N1 to N3 based on the tenure he wants and still get higher coupan payable to retail ?

    If the answer to above question is “yes”, why is there separate series for retail and non-retail, as both can buy bonds from either series and get coupans applicable to their category ?

    Thanks

    Reply

    1. Dear TCB,

      As your broker bids for your application, an exchange Bid ID gets generated which is known to the broker. It is not possible to successfully submit the application in a designated bank branch without BSE/NSE Bid ID. I am not sure whether there is any mechanism to check it online on the exchange’s website, but you can ask your broker the Bid ID of your application. I usually convey the Bid IDs to my clients when I do bidding of their application forms.

      Though I am not 100% sure, but I think it is possible for the retail investor to buy bonds issued to the non-retail investors and still get higher coupon applicable to the retail category. Coupon rate applicable to a retail investor would depend on the number of bonds held by the investor on the record date. If a retail investor subscribes to these bonds for Rs. 10 lakhs and buys some additional bonds from the market, then he/she would be categorized as a non-retail investor.

      I think separate categories are there as every listed security needs to carry a different ISIN number and different exchange code.

      Reply

      1. Hi TCB / Shiv,
        The rule is like this.
        1. These (retail / others) are separate series.
        2. Anyone buying into the retail series will get higher coupon rate if the “face value” of their holding at the time of interest payment is below Rs 10 lakh. If the value is above Rs 10 lakh, they will only get lower coupon rates.
        3. The “other series” will remain as it is – ie you will get only lower rate even if your holding is only Rs 1 lakh.
        Regards,

        Reply

  66. Hi Shiv,

    I have been reading your blog since inception and love the analysis you and Manshu bring to the table. Keep up the good work and ignore people like Sam.

    Do keep us posted with the date of listing.

    Reply

  68. 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.

    Reply

          2. So do you think it is going to be fully subscribed on Day 1 in the retail category ? I am waiting for NHB refunds and hope it comes before 15th Jan.

          3. I doubt it will get oversubscribed on the first day itself in the retail category. NHB refunds should start pouring in from Monday or Tuesday I think.

          4. Shiv – Will we also get the interest on the alloted and refunded amount along with the refund money ?

  69. Received the debit email (ASBA so funds have now been debited) from my bank today. 75% Allotment. Allotment email not received though (that is stating bonds have been credited into account).

    Reply

          1. Shiv – could you please clarify on “varying from investment amount to investment amount” ? i was under the impression that everyone gets the allotment in the same ratio

          2. I think the investors who have applied for only 1 bond, 2 bonds or 3 bonds should get full allotment. Also, as different investors are sharing different number of bonds allotted to them, I think it will not be 70% allotment to all.

  70. Today (11-1-2014) allocation money has been debited to my account. Money has been debited for roughly 67% of applied bonds. May be
    percentage will vary from person to person depending on date & time
    of application (my guess). Possibly will get bonds credited to my Demat
    account on Monday/Tuesday.

    Reply

    1. ‘Date’ & ‘Time’ of the applications will not be relevant at all. Only those investors who applied for it on the first day itself will get the allotment. Time of the applications is also not relevant as it will be done on a pro-rata basis. Its just that the investors who have applied for only 1 bond, 2 bonds or 3 bonds should get full allotment. It will get clear only once the Basis of Allotment gets announced.

      Reply

  71. Percentage of deduction of funds may not be used to arrive at percentage of allotment (which can be uniform). Eg at 74% allotment, A applied for 12 bonds can get 8 to 9 bonds which would require 66% to 75% deduction of funds.

    Reply

  72. Sorry, it was my calculation mistake. The alloment is 75% of applied bonds (not 67%). When are IIFCL Bonds expected?

    Reply

        1. Bonds get credited to every investor’s demat account before they start trading on the exchange(s). So, NHB bonds should get credited into your demat account today or tomorrow and then only its trading will start.

          Reply

    1. Many thanks, Shiv, for the Lohri wishes. I would like to add my best wishes for a great Lohri/Sankranti to all readers as well.

      Reply

      1. I got my refund too.. around 3 pm. 75% allotment. Hoping that the bonds get credited soon to the demat account. This will be the first TFB holding that i have ever had 🙂

        Reply

    1. No. ICICI Direct is yet to give refund or demat credit. Generally bonds get credited by midnight and refund comes a day delayed compared to others. We should get refund tomorrow , hopefully

      Regards
      Ramadas

      Reply

      1. SBI Cap also, I got refund in one account at 5PM. Other one is still not happened. The Bonds credited message came in both the demat accounts. I also want to update that HUDCO allocation message also came which is 100%

        Reply

        1. I think the investors should check their bank accounts to get refund info, if they are not registered with their banks for SMS Alerts. There will be cases in which the investors might not have received the refund and the interest on their investment amount as yet.

          I think the refund process should get completed by the end of the day today. Allotment process has also started and should get completed by the end of the day tomorrow.

          Reply

    2. Yes, I have an account with ICICI DIRECT. I have received the refund today morning. Looks like it is 25% refund + some interest.

      Reply

      1. Hi all, I too used the icicidirect account for this transaction. I see both a demat entry (75% of applied for bonds have been allocated) and the refund of my money (along with interest) in my bank account as of 10:30 PM today.

        Reply

  79. As mentioned in Point 4 in the post above, CPI inflation in December 2013 has moderated to 9.87% on the expected lines, as against 11.24% for November 2013. Also, as the 10-year G-Sec yield has fallen to 8.71% today, I think both these are reasonably good news for the bond/debt markets.

    Reply

  80. Hi Shiv,

    I have applied for NHB Bonds on day 1 itself by way of three different physical applications (2L, 1L & 1L) in the same name at different times. The bidding and banking has been done on the first day itself for all three applications. However, I didn’t receive any allotment for both 1L applications. Do you know the possible reason for non allotment in last 2 applications? As far as I understand that anyone applying the bonds on 1st day will day will get the 75% allotment even if the person is applying multiple applications. Any help out here will be highly appreciated.

    Thanks
    Sanjay

    Reply

    1. I have made 2 applications and both online in the morning itself. Allocation happened for both the applications. So multiple applications can not be a reason and mostly to do with the uploading. If you submitted after 3 PM, sometime upload happens next day.

      Reply

    2. Hi Sanjay,
      I think incorrect bidding or mismatch between bidding details and your application details should be the reason behind the rejection. You should check the exact reason either with your broker or the Registrar, Karvy Computershare.

      Reply

  81. I received messages from HUDCO and IRFCL regarding debit of application
    of money from my Savings Bank account. HUDCO bonds have been credited to my Demat account but not IRFCL. When can I expect these to be credited to my Demat account?

    Reply

    1. Hi Mr. Rakesh,
      You can expect the bonds to get credited to your demat account at least 7-8 working days after the issue gets closed. IRFC issue is scheduled to get closed on January 20th, if not extended beyond this date.

      Reply

  82. Got hudco 100% and nhb 70%. Thanks Shiv I wouldn’t even have known of these if I wasn’t following the blog. Any ideas on how to invest the interests. Thanks

    Reply

  83. Got 75% allotment for NHB. Hudco bonds also got credited to dmat a/c today though the issue closed 2 days after NHB closing. Any idea when these two will get listed?

    Reply

  85. Think our investment in NHB tax free bonds has been near perfect.
    WPI inflation in December 2013 has come down more sharply than expected to 6.16% against 7.52% in November 2013. Also, the 10-year G-Sec yield has fallen to 8.62% from 8.71% as of yesterday and from around 9% few weeks back.
    This suggest that issues in near future may not be able to give high rate of interest and also listed bonds having high interest rate would have better valuation in the secondary market.

    Reply

  87. NHB tax-free bonds to get listed on the NSE on January 16th i.e. Thursday.

    Here are the NSE codes for the same:

    8.51% 10-year bonds – NSE Code – N4
    8.88% 15-year bonds – NSE Code – N5
    9.01% 20-year bonds – NSE Code – N6

    Deemed date of allotment has been fixed as January 13, 2014. Interest will be paid on January 13th every year.

    Reply

  88. Mr Shiv,
    i have received in my DP but not received the refund amount
    what should i do .. i want to buy 25 % from market even at higher rates..
    what do you suggest sir.

    Reply

      1. thanks shiv for your suggestion.

        Earlier you gave a useful Edeweiss url to check rates / compare various Bond price in market .. can you pl. paste that link as i lost it ..

        Reply

  90. NHB bonds got listed today on the NSE. 9.01% 20-year bonds opened at Rs. 5,055.10, which was also the lowest price these bonds traded at, touched a high of Rs. 5,105 and finally closed at Rs. 5,100.88.

    Total 1,33,444 bonds got traded on the stock exchange, worth Rs. 68.01 crore. People, who say there is a lack of liquidity with these bonds, should notice these volumes. These volumes are good enough to exit, partially liquidate or increase your investments.

    Reply

  91. hi shiv

    exactly got 75 percent allocation. money refunded along with interest. but whether interest given for refund taxable ?

    any other tax free bonds open as of now ?

    Reply

    1. Hi Vignesh,

      Yes, the interest earned on the application money as well as on the refund money is taxable.

      Also, two issues are open as of now, NHAI 8.75% (15Y) & 8.52% (10Y) and IRFC 8.65% (15Y) & 8.48% (10Y).

      https://www.onemint.com/2014/01/12/nhai-tax-free-bonds-january-2014/
      https://www.onemint.com/2013/12/28/irfc-tax-free-bonds-8-65-january-2014-issue/
      https://www.onemint.com/2014/01/15/nhais-8-75-or-8-52-vs-irfcs-8-65-or-8-48-which-issue-is-better/

      Reply

  92. Hi Shiv,

    I am a retail investor and am planning to buy NHB Tranche – I Series 3B (9.01%, 20 yrs) bonds in the secondary market. Am I eligible to get 9.01 % interest on these bonds or lesser, since I was not a direct allottee ?

    A silly question, Also will the interest from these bonds continue to be tax free in my hands ?

    Thanks in advance
    LittleG

    Reply

    1. Hi LittleG,

      If you buy tax-free bonds issued this financial year, including NHB bonds, you’ll be eligible for the same rate of interest as it is there for the first allottees. In this case, you’ll get 9.01% rate of interest. This rate of interest will be valid till your investment amount doesn’t cross Rs. 10 lakh mark. Also, it will remain tax-free for you as well.

      Reply

  93. Hello Shiv

    Is it possible for NRIs to buy NHB bonds from Secondary market since they were not allowed to participate in IPO.

    Thanx

    Reply

    1. Hi Rakesh,

      Though I don’t think NRIs are allowed to buy NHB bonds from the secondary markets, but I am not 100% sure about it. You’ll have to check it with the company about it.

      Reply

  94. IREDA has filed the Draft Shelf Prospectus with SEBI for its tax free bond issue on January 21st. The issue will be ‘AAA’ rated and NRIs are not eligible to invest in this as well.

    Reply

  95. Hi Shiv
    NHBTF 2014. N 6 – retail Investor (category. I.) coupon rate. 9.01 %. and N. 3. – Category. II ( Trust ). Coupon rate. 8.76 %
    If I purchase from open market ( NSE ). N 6 ( Retail category ) and this will go in to my Trust Demat a/c which fall in to category II , then what coupon rate I will get ? ( 9.01 %. OR. 8.76 % )

    Reply

  96. Dear Mr Shiv ,
    Most of all the boarders would find very interesting topic for today market ..
    can you help us all with this Topic ?

    Which is best listed tax free bond?
    you earlier posted on JULY 16, 2012…

    Reply

    1. Hi Rohit,

      I think Manshu did a post on the same and it doesn’t make any sense to me to do a post on the same now. I think its too late to cover it as most of the issues are already over. I made a couple of comparisons – (i) between NHPC and PFC and (ii) between IRFC and NHAI, but at present only IRFC issue is open, so there is nothing to compare it with.

      Reply

      1. sorry Mr shiv , i was requesting about listed bonds (secondary market) as we dont have many options left in Primary market.
        i urgently want to buy but dont know which to buy as some are
        with 2-4 % premium on issue price. Need to know which can give best YTM at present market …thanks a ton .

        Reply

        1. This is the way I calculate the YTM of listed bonds, please let me know if I am right – as an illustration, let me cite the latest NHB 9.01% tax-free bonds (NHBTF2014 N6):
          CMP: 5167
          Interest for 15 days (Jan 13-28) embedded in the bond: 18.51
          CMP net of embedded interest: 5148.49 (this is the actual amount we are going to pay for this bond)
          Therefore, YTM: 450.5 (annual interest per bond)/ 5148.49 = 8.75%

          However, I have not considered brokerage cost here. Brokerage will further reduce the yield.

          Reply

        2. Hi Rohit,
          It is not easy to do such a comparison and conclude which one is the best among all the listed bonds. One which is trading at a higher yield today might become pricier after a month or so. Then it would not remain the best of all. Do your own research or consult a financial advisor to help you in buying some high yielding bonds.

          Reply

  98. Thanks shiv you are very helpful. These bonds are trading at very high premium. I wanted to buy it from market but i didn’t know about such a high premium.

    Reply

  100. I haven’t received the physical certificate for NHB bonds yet. Only received the allotment letter. Anyone else still waiting for the certificate? I plan to convert it to demat form.

    Thanks

    Reply

  103. ‘AAA’ rated NHB tax free bonds issue is getting opened on March 7th with the following coupon rates – 8.50% p.a. for 10 years, 8.93% p.a. for 15 years and 8.90% p.a. for 20 years. Issue size is Rs. 1,000 crore and will get closed on March 18th. NRIs cannot apply in this issue.

    Reply

  104. Dear Mr Shiv ,
    which should you suggest 15 year / 20 year 8.93% , 8.90% ?
    i am confused , do you think it will be filled within 1 day ??
    Pl. reply my query ..

    Reply

    1. Dear Dr. Agarwal,
      It is a very close call to take. Had it been 8.93% p.a. for 20 years as well, I would have definitely gone for the 20-year option. Probably I would still prefer the 20-year option over the 15-year one for my personal/family investments, but I think most of the investors would go for the 15-year option and even I would advise my clients to go for that one.

      Reply

  105. if I will purchase the tax free bond from the NSE , what will the effective rate of interest applicable to me

    Reply

  106. Hi Shiv,

    One question on the tax treatment of interest payouts in general. Say the bond start date is 10th July. Investment was made on 4th July. The interest earned during those 6 days, is this tax free?

    Thanks,
    DPP

    Reply

  107. Hi Shiv

    as per my knowledge and as per previously you have ake a chart for the Date of Bonds Interest.
    And as per that i think the interest of NHB issue on 13 th January 20124 , and the next interest date was 13 th January 2015 also in HUDCO T 2 – issue on13 th Januaru 2014 and next interest date was 13 th January 2015

    But to-day i check my Bank account and none of the interest is credited in to my account.
    Can you tell me that my above dates for interest is correct or if it is not can you tell me what are the interest dates for this two tax free bonds.

    Thanks

    Reply

    2. Hi Paresh,
      The interest payment date for both these bonds is January 13th. Like Amlan, I too received the interest payment from NHB yesterday. You should wait for a day or two more and then check it with the Registrar why your interest has not been paid.

      Reply

  108. Hi Shiv
    Can you give me the name of the Registrar of the following two Tax Free Bonds ?
    HUDCO T 2 AND NATIONAL HOUSING BANK
    Please give me the details because to day is 15 th and still interest is not credited in to my Bank Account.
    Against application money in January 2014 i received the interest directly in to my Bank account. So i think their should not be any problem for Bank Account details

    Reply

  109. Hi Shiv,
    Wanted to invest in TFBs from secondary market. What are the bonds with best YTMs as of now? You can send me an email with your fee details etc if this query is something that falls in that category.

    Reply

    1. Hi Sanjiv,
      Please mail me your investment horizon and financial goal for which you want to make this investment and I’ll revert you with my views/workings about TFBs. I’ll also let you know our fee (if any).

      Reply

  110. Hi Shiv
    Thanks for giving the name of Registrar.
    Secondly i got the Interest credit in to my Bank Account on 17 th January.
    Thanks again for helping me.

    Reply

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