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| Nabard seeks to extend Bhavishya Nirman bonds for two more years |
| Namrata Acharya / Kolkata May 27, 2009, 00:32 IST |
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The issue price of Bhavishya Nirman bonds from the National Bank for Agriculture and Rural Development (Nabard) may rise to more than Rs 9,000 if the new Union government approves the proposal to renew the bonds for another two years.
Sources close to the development said that the bonds might open for subscription within the next two-three months, before the government presents the 2009-10 Budget.
The bond, which was launched in February 2007, had an initial price of Rs 8,500, which was revised to Rs 8,750 in January 2009, with a guaranteed return of Rs 20,000 after 10 years. Nabard had sought the renewal of the 10-year zero coupon bonds a few months ago, but the approval was held up due to the Lok Sabha elections.
When Nabard launched the bonds in 2007, the government had set a target of mobilising about Rs 10,000 crore in two years. However, it has managed to garner only Rs 4,700 crore during the period, sources added.
The Bhavishya Nirman bonds failed to garner much interest among retail investors in the first year, as the equity market was on the upside. About 75 per cent of the collection from the bonds were in the second year, particularly in the last three months. The bonds are not subject to deduction of tax at source (TDS), but the income is treated as capital gains at the time of maturity. Last week, the yield on the 10-year benchmark gilt ended at about 6.48 per cent.
"The performance of the bonds was not up to our expectation. Now we have sought another two years from the government to reach the Rs 10,000-crore target. We expect the government to grant approval in the next two to three months, and the bonds will be open for retail subscribers soon after," the sources said.
At Rs 8,500, the simple annualised post-tax returns from the bonds worked out to be 12.18 per cent, whereas the compounded annually post-tax returns was 8.29 per cent per annum, according to Nabard. At Rs 8,750, the simple post-tax returns from the bond was 11.57 per cent.
While the issue price is expected in the range of Rs 9,000-9,750, the simple post-tax returns from the bonds could be less 10 per cent, and compounded returns less than 7 per cent, sources at Nabard said.
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