Author: Shiv Kukreja

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

After a month long break, tax free bond issues are back and the 10-year options are looking much healthier now carrying annual coupon rates of 8.76% and 8.66% for ‘AA+’ rated HUDCO issue and ‘AAA’ rated NTPC issue respectively, as against its previous highs of 8.43% for ‘AAA’ rated PFC & NHPC issues and 8.39% for ‘AA+’ rated HUDCO issue.

While this jump has come due to a consistent rise in the yield of the benchmark 7.16% 10-year government bond, the coupon rates with 15-year option and 20-year option have been the highest ever with the HUDCO issue as it is rated ‘AA+’ and carries a leverage of 10 basis points (or 0.10% per annum). I’ll cover the HUDCO issue today and the NTPC issue tomorrow.

HUDCO is launching the second tranche of its tax free bonds from Monday, December 2nd and it will be the first ever tax free bond issue to cross the psychological mark of 9% coupon rate.

Size of the Issue – HUDCO has set the base issue size at Rs. 500 crore with an option to retain oversubscription up to Rs. 2,439.20 crore. The company has already raised Rs. 2,560.80 crore in its first tranche and through a private placement. I think this issue is attractive enough for it to become the last issue from HUDCO’s stable.

Rating of the Issue – Like Tranche I, this issue has also been rated ‘AA+’. CARE and India Ratings are the two companies which have passed their opinion to assign this rating to the current issue.

Again, the bonds are ‘Secured’ in nature as certain receivables of the company will be charged to the extent of amount to be mobilized under the issue. Also, as HUDCO is wholly-owned by the government of India, I would consider the investors’ investments to be comfortably safe in the issue.

OK to NRI Investment – Non-Resident Indians (NRIs) are eligible to invest in this issue, on a repatriation basis as well as on non-repatriation basis. Qualified Foreign Investors (QFIs) are also eligible.

Investor Categories & Allocation Ratio – As always, the investors have been classified in the following four categories and each category will have certain percentage of the issue size reserved for the allocation:

Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue is reserved

Category II – Non-Institutional Investors (NIIs) – 20% of the issue is reserved

Category III – High Net Worth Individuals including HUFs, NRIs & QFIs – 30% of the issue is reserved

Category IV – Resident Indian Individuals including HUFs, NRIs & QFIs – 40% of the issue is reserved

First Come First Served Allotment – Subject to the allocation ratio, allotment will be made on a first come first serve (FCFS) basis in each of the investor categories, based on the date of upload of each application into the electronic system of the stock exchanges.

Listing – Bombay Stock Exchange (BSE) is the only exchange on which these bonds will get listed and the exchange has given its in-principle listing approval to the bonds issued under this tranche. As with all the recent issues, these bonds also will get allotted and listed within 12 working days from the closing date of the issue.

Demat/Physical Option – Investors can apply for these bonds either in physical form or in demat form, as per their comfort and requirement.

No Lock-In Period – These bonds are offering good rate of interest which is tax-free also under Indian taxation laws. As your investment does not provide any tax deduction, there isn’t any lock-in period with these bonds. As these bonds get listed on the BSE, you may sell them whenever you want at the market price.

Interest on Application Money & Refund – HUDCO is the only company which pays the same rate of interest as the applicable coupon rate is on the application money as well as on the money due for a refund. So, with the 20-year option, you’ll get 9.01% as the rate of interest on your application money as well as the refund amount.

Minimum & Maximum Investment – Investors are required to put in a minimum investment of Rs. 5,000 in this issue i.e. at least 5 bonds of Rs. 1,000 face value each. Retail Investors’ investment limit stands at Rs. 10 lakhs, beyond which they will be considered as HNIs and will get a lower rate of interest.

Interest Payment Date – HUDCO has not announced the interest payment date of this issue as yet. I will update this post as and when it gets announced at the time of listing.

While it will be a bonanza for the fixed income investors, I’ll consider this to be a bad situation for the commercial banks, the government and the borrowers. Let’s check how.

Many people have been breaking their fixed deposits to invest in these tax free bonds. It is putting a lot of pressure on the banks to either hike their deposit rates or increase premature withdrawal charges.

As the money is moving out of taxable instruments like fixed deposits, post office schemes etc., the government is also losing out a big amount in tax revenues.

Higher rate of interest will force banks to hike their lending rates also in order to maintain their net interest margins (NIMs) and this outcome will put an additional burden on the borrowers.

With a huge difference between the 10-year interest rate and the 20-year or 15-year rates, I used to prefer the 20-year or 15-year options earlier. But, as the difference has narrowed down considerably, the 10-year option has also become quite attractive now. However, I still prefer the longer duration options as I think it is better to stay invested with longer duration bonds when the interest rates get higher.

Though the issue is scheduled to get closed on January 10, 2014, I really doubt that it would continue that long. I expect it to get closed earlier than that given other companies don’t offer a similar or higher rate of interest.

With coupon rate crossing 9% now on these tax free bonds, there is no reason for the investors to ignore such high rate of interest and keep investing their fresh money into fixed deposits or keep their money invested in it.

Application Form of HUDCO Tax Free Bonds

HUDCO Tax-Free Bonds – Bidding Centres

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

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

With rising inflation and high fiscal deficit here in India, yields on government securities are also rising and high G-Sec yields bring along some good investment opportunities for the prospective tax-free bond investors. Many of the investors, who could not invest in the previous five tax-free bond issues of REC, HUDCO, IIFCL, PFC and NHPC, have been eagerly waiting for the new issues to get launched.

A few days back Ramadas asked me if I know when the next tax free bond issue will hit the market. Here is what he had to say:

Ramadas November 19, 2013 at 7:16 am

Hi Shiv

Do you know when next tax free bond issue will hit the market? I see IRFC has already filed prospectus with SEBI. NTPC and NHB are in the news. Any confirmed dates when next tax free bonds will be issued?

I have received many such queries in the past 15-20 days as many people have been asking this question on different posts.

As none of the companies has filed the final prospectus for its issue, nobody knows the exact opening dates of the upcoming tax free bond issues. But, with whatever information I have and based on the dates of filing of their draft shelf prospectus, here is the list of tax free bond issues which are going to hit the streets in the next one month or so.

IIFCL Issue – Last week of November – IIFCL announced earlier this month that it would launch the second tranche of its tax free bonds in the third or the fourth week of November. IIFCL has already raised around Rs. 4,200 crore out of Rs. 10,000 crore it has been allowed to raise from tax-free bonds this financial year.

HUDCO Issue – Last week of November – I have been told by a close associate that HUDCO is also planning to launch the second tranche of its tax-free bonds issue in the next 3-5 days time. The company could raise around Rs. 2,400 crore in the first tranche which got closed on October 14. HUDCO still has the authority to raise another Rs. 2,400 crore.

IRFC Issue – First week of December – IRFC filed the draft shelf prospectus with SEBI to raise Rs. 10,000 crore from its tax-free bonds issues on November 11. As observed in the past, it takes around 15-20 days for a company to launch its public issue from the date it files the draft shelf prospectus.

Also, as Shashwat shared it yesterday, an official of IRFC has told Deccan Herald that it is planning to launch its public issue in December. Taking a cue from it, I think IRFC issue should hit the streets in the first week of December.

NTPC Issue – First week of December – Just a few days after IRFC did it, NTPC also filed the draft shelf prospectus on November 15 to raise Rs. 1,750 crore from tax-free bonds. So, I expect NTPC issue also to hit either in the first week or the second week of December.

NHB Issue – Second week of December – Though NHB raised Rs. 900 crore from these bonds through private placement in August this year, it has taken more than usual time to do it through its public issue. But, now they have officially announced to launch its issue in the second week of December. I hope they do not delay it further.

NHAI Issue – Second half of December – Last month, NHAI announced its plan to raise funds through these bonds sometime in December. But, as the company has still not filed its draft shelf prospectus as yet, I do not see the issue hitting the streets before second half of December.

November was a dry month as far as tax free bond issues are concerned. But, if all these issues get launched sometime next month, it would really create a glut for these bonds in the market.

Thanks to the high interest rates scenario, these companies would find it less difficult to attract investors’ money to get invested in these bonds.

I’ll update this post as and when I have any information about any new issue getting launched and the coupon rates it is going to carry. If any of you get any kind of information, please share it here so that all of us benefit out of it.

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

As Muthoot Finance NCD issue gets preclosed on Monday, Shriram City Union Finance (SCUF) is also launching its issue of non-convertible debentures (NCDs) from the same day, November 25th. The company plans to raise Rs. 200 crore from the issue, including Rs. 100 crore of green shoe option.

SCUF has decided to offer an annual coupon rate of 11% for a period of 36 months, 11.25% for 48 months and 11.50% for 60 months to the retail investors and high networth individuals (HNIs).

Institutional investors, non-institutional investors, corporates etc. will be paid a lower rate of interest, which has been fixed at 10.75% per annum across all seven options, for all the tenures – 36 months, 48 months or 60 months.

It will be a month-long issue which is scheduled to close on December 24th i.e. Tuesday. As the issue size is small, the company has the option to preclose it as and when it gets oversubscribed. If it gets a poor response, the company may extend it also.

Retail investors category investing up to Rs. 5 lakh would get 40% pie of the issue. Individual investors investing more than Rs. 5 lakh in a single name would be categorised as HNIs and 40% of the issue size has been reserved for this category of investors also.

Categories of Investors & Allocation Ratio – The investors have been classified in the following four categories and each category will have a certain percentage fixed in the allotment:

Category I – Institutional Investors – 10% of the issue is reserved

Category II – Non-Institutional Investors & Corporates – 10% of the issue is reserved

Category III – High Networth Individuals including HUFs – 40% of the issue is reserved

Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved

NCDs will be allotted on a first come first served basis.

NRI Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.

Ratings & Nature of NCDs – The issue has been rated as ‘AA’ by CARE and all these NCDs are ‘Secured’ in nature. It indicates reasonable safety for your investment amount.

Listing, Demat & TDS – SCUF has proposed to list its NCDs on the Bombay Stock Exchange (BSE) as well as on the National Stock Exchange (NSE). Investors have the option to apply these NCDs in physical form as well as demat form. However, trading of these NCDs will happen only in the demat form.

Interest earned on these NCDs is taxable as per the tax slab of the investor and TDS will be applicable if the interest amount exceeds Rs. 5,000 in a financial year. NCDs taken in the demat form will not attract any TDS on the interest income.

Minimum Investment – Minimum investment in this issue has been fixed as Rs. 10,000 i.e. 10 bonds of face value Rs. 1,000.

Performance of Last Year’s SCUF NCDs

As you can check from the table above, SCUF NCDs issued last year, with maturity periods of 36 months and 60 months, are trading at yields of 11.58% to 13.73%, much above the coupon rates offered in the current issue.

Also, with a private company being the issuer, it is always advisable to go for the least possible tenure offering attractive coupon/yield. As compared to the current issue, last year’s NCDs carry lower risk as the maturity period has become shortened.

Interest rates have also risen since its last issue. So, I would say if anybody wants to make an investment in SCUF NCDs, it is better to go for already listed NCDs rather than subscribing for them in the current issue.

Looking at the subscription figures of recent NCD issues of IIFL, Shriram Transport Finance, Muthoot Finance etc., it seems to me that the investors are not performing any due diligence before subscribing to these NCDs, rather these NCDs are getting sold to them by their brokers. Personally, I would avoid this issue for my own investments.

Application Form of Shriram City Union Finance NCDs

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 SCUF NCDs, you can contact me at +919811797407

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

Muthoot Finance has again come out with a public issue of its secured and unsecured non-convertible debentures (NCDs) and it has been launched from today. This would be the second issue from Muthoot Finance this financial year after it raised Rs. 300 crore in September from its first issue.

The issue will remain open for two weeks to get closed on December 2nd i.e. first Monday of December. The company may extend the closing date of the issue or preclose it, depending on the response for the issue.

Most of the features of the current issue, including its coupon rates for the retail investors, are same as they were in the first issue. Let us first have a look at all of its features.

Size of the issue – The company plans to raise Rs. 300 crore from this issue as well, including the green shoe option of Rs. 150 crore.

Coupon Rates – Like Muthoot offered in its earlier issue as well, the company promises to double your investment amount in 6 years’ time i.e. 72 months with an effective yield of 12.25% per annum. But, NCDs issued under this option are ‘Unsecured’ in nature.

Apart from this option, it is offering coupon rates ranging from 11% to 12.25% with different maturity periods and different interest payment options as you can very well check from the table below.

Coupon Rates for Institutional Investors – This is one significant change Muthoot has made as compared to its first issue. Muthoot has decided to offer a lower rate of interest to the institutional investors and the difference is of 75 basis points (or 0.75%) across all the options, except option VII. The difference is of 0.25% only with option VII.

Categories of Investors & Allocation Ratio – The investors have been classified in the following three categories and as always, each category will have certain percentage fixed for the allotment:

Category I – Institutional Investors – 15% of the issue is reserved

Category II – Non-Institutional Investors & Corporates – 35% of the issue is reserved

Category III – Retail Individual Investors including HUFs – 50% of the issue is reserved

NCDs will be allotted on a first come first served basis in all these categories.

NRI Investment – Like its first issue, non-resident Indians (NRIs) are not allowed to invest in this issue as well.

Ratings & Nature of NCDs – There are two rating agencies involved in this issue – CRISIL and ICRA and both have assigned ‘AA-/Negative’ rating to this issue. All these NCDs are ‘Secured’ in nature, except NCDs issued under option XI which offer to double your money.

Listing, Demat & TDS – Muthoot has proposed to list its NCDs only on the Bombay Stock Exchange (BSE). Investors will again have the option to apply these NCDs in physical form as well as demat form under options I to VI. Applicants cannot apply for allotment of these NCDs in physical form under options VII to XI i.e. these NCDs will be allotted only in dematerialised form under options VII to XI.

Again, the interest earned will be taxable as per the tax slab of the investor and TDS will be applicable if the interest amount exceeds Rs. 5,000. But, NCDs taken in the demat form will not attract any TDS on the interest income.

Minimum Investment – Minimum investment in this issue as well has been fixed as Rs. 10,000 i.e. 10 bonds of face value Rs. 1,000.

Muthoot NCDs, issued in the first issue this year, have allotment date of September 25th i.e. they were issued around two months back. As you can check from the table above, most of these NCDs are still trading below their face value.

Also, liquidity is very poor with these NCDs, especially under unpopular options like cumulative interest & annual interest options and also with longer duration options of 60 months & more.

Interest rates have also risen since then. So, if I need to invest my money in Muthoot NCDs, I would go for already listed NCDs rather than buying them from the company in this issue.

Also, gold financing sector overall is not doing that great, but Muthoot is a key player in this sector. Investors need to factor in all these variables before applying for these NCDs.

Application Form of Muthoot NCDs

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 Muthoot NCDs, you can contact me at +919811797407

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

Two power sector companies are inviting your applications for their tax-free bonds – PFC 8.92% bond issue is already open, the issue size is Rs. 3,875.90 crore and has received an extremely good response from the investors by getting subscribed to the tune of Rs. 2,639.30 crore in just two days time. NHPC is entering the field for a competitive fight from October 18th with a smaller issue size of Rs. 1,000 crore.

As far as the features of these two issues are concerned, the fight is so close that it has become extremely difficult for retail investors to make a decision. There are so many features which are absolutely same in both the issues and there are other features which are similar, but do not have much relevance to be considered. Just have a look at the features which are same and which are mildly different:

With interest rates exactly the same, both being PSUs and with features so similar, it becomes extremely difficult to make a choice based on just the features of these two issues. So, I thought of doing a fundamental comparative analysis between the two companies.

Profile of PFC & NHPC

PFC got incorporated in 1986 as a financial institution to finance, facilitate and promote India’s power sector development. It is a Central Public Sector Enterprise (CPSE) and got declared a Mini-Ratna enterprise in 1988 and entitled Navratna status in 2007.

PFC provides loans for various power-sector activities, including power generation, power distribution, power transmission and plant renovation and maintenance. PFC finances state electricity boards (SEBs), power generating companies of states and independent power producers (IPPs).

NHPC got established in 1975 to execute all aspects of hydroelectric power project development, from concept to commissioning. It was declared a Mini-Ratna Category-I CPSE in 2008 and has recently sought Navratna status from the government.

To be eligible for ‘Navratna’ status, a company needs to have a score of 60 out of 100, based on certain parameters which include net profit, net worth, total manpower cost, total cost of production, cost of services, Profit Before Depreciation, Interest and Taxes (PBDIT), capital employed etc.

As a Mini-Ratna Category-I entity, NHPC has been granted autonomy to undertake new projects. NHPC has developed and constructed 17 hydroelectric power stations and has current total generating capacity of 5,676.2 MW which is approximately 14.4% of the total hydel generating capacity in India.

It has power stations and hydroelectric projects located predominantly in the North and North East of India, in the states of Jammu & Kashmir, Himachal Pradesh, Uttrakhand, Arunachal Pradesh, Assam, Manipur, Sikkim. and West Bengal.

Credit Ratings of PFC & NHPC

International credit rating agencies Moody’s, Fitch and Standard & Poor’s (S&P) have granted PFC long-term foreign currency issuer ratings of “Baa3”, “BBB-” and “BBB-“, respectively, which are at par with the sovereign ratings for India.

NHPC has also been assigned “BBB-” rating by Fitch. S&P had also given “BBB-” rating to NHPC and removed it from ‘CreditWatch’ in September 2009, based on its assessment of NHPC’s “very strong” link with the government. S&P expressed its opinion that “there is a high likelihood that the government of India would provide extraordinary support for the company in the event of any financial distress”.

S&P also said that the ongoing support from the government is reflected in a tripartite agreement between NHPC, state electricity boards and the government, which largely mitigates the risk of any delay in payments from NHPC’s customers – the state electricity boards (SEBs) that have weak credit profiles.

Financials & other factors to consider

NHPC is a bigger company with a market cap of Rs. 22,203 crore based on its 15th October’s closing share price of Rs. 18.05. On the other hand, market cap of PFC is Rs. 17,306 crore with its share price being Rs. 131.10.

NHPC is also a less riskier company and it gets reflected in its PE ratio. The market is ready to pay NHPC a higher price for buying its shares based on its earnings, as compared to PFC. NHPC is trading at a P/E Ratio of 8.48 times as compared to PFC which is trading at 3.90 times.

PFC’s P/E Ratio of 3.90X is too low and it makes me feel that the market either believes PFC’s earnings to decline considerably at some point in future or some of the borrowers to default on their loan/interest payments.

Final Opinion

I am not a power sector expert. But, as a retail investor, I think NHPC is a better company to invest your money in the power sector. As a common consumer of electricity, this is what I understand – I buy electricity from a private power distribution company in Delhi, which in turn buys it from a power generation company like NHPC etc. Power generation business is a capital intensive business, for which companies like NHPC get capital infusion from the governments, loans from the power financiers like PFC, REC etc. and carry internal accruals by generating profits.

For NHPC, it is better to take money directly from us, the retail investors, rather than we giving money to PFC and then PFC lending it to NHPC at a higher rate. PFC’s fortunes hinge on the power producers like NHPC. If power producers are doing well, PFC would do better, but, if they are not doing good, PFC cannot do anything about it. This relationship is somewhat similar to real estate developers and project finance companies.

The fortunes of these power producers also depend on its cost of the factors of production, like labour, raw materials, technology, machinery etc. Most power plants here in India are coal-based, for whom it becomes a problem if coal supply gets interrupted or they have to import expensive coal due to its scarcity or falling value of rupee. For NHPC, the raw material cost is minimal.

My views might reflect very basic understanding because I don’t know how exactly things get carried out. I could have done some deep research on the functionalities & technicalities of the power sector companies, but then it would have become too complicated for me as well you to understand. So, personally & marginally, I prefer NHPC tax-free bonds over PFC tax-free bonds. Which one is your preference? Please share it share.

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

NHPC Limited (formerly National Hydroelectric Power Corporation) will launch its issue of tax-free bonds from October 18th, the coming Friday. Coupon rates of NHPC are absolutely same as they are offered by PFC in its issue which is getting open for subscription from today i.e 8.92% per annum for 20 years, 8.79% per annum for 15 years and 8.43% per annum for 10 years.

NHPC has decided to run this issue till November 11th, the same date on which the PFC issue is also slated to get closed. But, in case of oversubscription or undersubscription, the company has the authority to preclose the issue or extend the issue closing date.

Size of the Issue – The base size of the issue is Rs. 500 crore and there is a green-shoe option with the company to retain oversubscription of an additional Rs. 500 crore, thus making this issue of Rs. 1,000 crore the smallest of all the tax-free bond issues launched this financial year so far.

Rs. 1,000 crore is the total amount NHPC has been authorised to raise from tax-free bonds this financial year. I think NHPC will not be required to do any private placement to raise money from tax-free bonds as there is enough appetite for its high yielding bonds in the market.

Red Signal again for NRIs – Like IIFCL did that first, NHPC has also decided not to offer these bonds to the non-resident Indians (NRIs) and qualified foreign investors (QFIs). So, if any of the NRIs wants to invest in the tax-free bonds yielding as high as 8.92%, then he/she will have to opt for the PFC issue.

Rating of the Issue – Like PFC issue, NHPC issue is also ‘AAA’ rated. ICRA, CARE and India Ratings have assigned ‘AAA’ rating to this issue, which is their highest rating to any debt issue. Also, the bonds will be ‘Secured’ by a pari passu first charge on specific assets of the company, with an asset cover of one time of the total outstanding amount of bonds.

Listing – NHPC has become the first company to propose and obtain the necessary approval to get its tax-free bonds listed on the National Stock Exchange (NSE) as well as on the Bombay Stock Exchange (BSE) this financial year.

Investors can apply for these bonds either in demat form or in physical form, as per their choice. The company will get the bonds allotted and listed within 12 working days from the issue closing date.

No Lock-in Period – As these bonds get traded on the stock exchanges and do not provide any tax deduction u/s 80CCF or 54EC, there is no lock-in period with these bonds. The investors are allowed to sell these bonds at the prevailing market rate whenever they want to do so. There are no charges involved with premature encashment and there will not be any tax penalty payable to the tax authorities.

No TDS – As these are tax-free bonds, there is no question of TDS getting deducted, whether you take them in physical form or demat form.

Interest Payment Date & Record Date – NHPC has decided to fix April 1, 2014 as the first interest payment date. For subsequent years also, interest will be paid on April 1st every year. The record date for payment of interest or the maturity amount will be 15 days prior to the date on which such amount is payable.

Categories of Investors & Allocation Ratio – The investors again have been classified in the following four categories and each category has certain percentage of the issue reserved for the allotment:

• Category I – Qualified Institutional Bidders (QIBs) – 15% of the issue is reserved
• Category II – Non-Institutional Investors (NIIs) – 20% of the issue is reserved
• Category III – High Networth Individuals (HNIs) including HUFs – 25% of the issue is reserved
• Category IV – Resident Indian Individuals (RIIs) including HUFs – 40% of the issue is reserved

Allotment on FCFS 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.

Minimum & Maximum Investment – Investors are required to apply for a minimum of five bonds of Rs. 1,000 face value each, thus making Rs. 5,000 as the minimum investment to be made. An applicant may choose to apply for these bonds of the same series or across different series also.

Retail Investors’ investment limit stands at Rs. 10 lakhs, beyond which they will be considered as HNIs and will get a lower rate of interest.

Interest on Application Money & Refund – NHPC will pay interest to the successful allottees on their application money at the applicable coupon rates, from the date of realization of application money up to one day prior to the deemed date of allotment. Unsuccessful allottees will get interest @ 5% per annum on their refund money.

Though the issue is getting launched four days after the PFC issue, I think it is very important for the investors, who are planning to invest in PFC and NHPC both or only in NHPC, to first go for the NHPC issue as soon as possible because the issue size in itself is relatively much smaller. Retail investors will have only Rs. 400 crore to be invested in this issue as compared to Rs. 1,550.36 crore to be invested in the PFC issue.

Also, I think the spillover portion of the non-retail investors is unlikely to fall into retail investors’ kitty this time around. As compared to the PFC issue, I think there is a high probability that this issue will get a better response from the non-retail investors also, as they would like to diversify their investments across different companies and this is the first time NHPC has been issuing these tax-free bonds through a public issue.

That is why, I think this issue will get preclosed much earlier than its official closing date of November 11th. I am expecting this issue to get oversubscribed very soon and get closed in October itself.

Application Form of NHPC Tax Free Bonds

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