Companies plan second tranche of tax-free bonds

Public sector companies that have raised funds through tax-free bonds in the recent past are planning to issue another tranche of such bonds. Issue arrangers said this was because the previous tranches weren’t able to raise the amounts planned.

Rural Electrification Corporation and Indian Railway Finance Corporation are planning to raise at least Rs 100 crore and Rs 1,000 crore, respectively, through tax-free infrastructure bonds. They would offer retail investors coupon rates of 7.38 per cent on 10-year bonds and 7.54 per cent on 15-year bonds. Housing and Urban Development Corporation plans to raise at least Rs 500 crore through a second tranche of tax-free infrastructure bonds. The company would offer 10- and 15 year bonds. For retail investors, the 10-year bonds would have a coupon rate of 7.53 per cent, while 15-year bonds would have a rate of 7.69 per cent.

For the current financial year, the government had allowed state-owned financial institutions to raise about Rs 60,000 crore through tax-free bonds, compared with Rs 30,000 crore in the previous financial year. A few arrangers feel as the issuances did not see much success this financial year, the government may reduce the cap on the amount in 2013-14. They added to meet their fund requirements, these companies has also lined up bond issuances through private placements.