REC bond issue to close on Sep 16

Hudco issue to open on Sep 17

Rural Electrification Corporation (REC)’s tax-free bond issue would close on September 16, while that of Housing and Urban Development Corporation (Hudco) would open for subscription a day later.

The REC issue would close ahead of the scheduled date of September 23, as it has almost recorded full subscription. So far, the Rs 3,500-crore offering has mopped up Rs 3,405 crore, led by good subscription from retail investors. Excluding institutional investors, all other categories have been fully subscribed, stock exchange data show. So far, the qualified institutional buyer segment has received only Rs 245 crore, against Rs 700 crore on offer.

While the corporate segment received bids worth Rs 873 crore, against Rs 700 crore on offer, the high net worth individual segment has seen bids worth Rs 755 crore, against Rs 700 on offer. The retail investor segment recorded bids worth Rs 1,532 crore, against Rs 1,400 crore on offer.

Hudco’s tax-free bond issue, which aims to raise about Rs 4,800 crore, would open for subscription on September 17. The company is offering coupon rates of 8.4 per cent, 8.51 per cent and 8.49 per cent for 10-year, 15-year and 20-year bonds, respectively. The coupon rates for retail applicants would be 25 basis points higher for all the three tenures.

Hudco's public issue of tax-free bonds is this financial year's second such offering after Rural Electrification Corporation (REC). The coupon rates offered by REC were 8.01%, 8.46% and 8.37% for 10 years, 15 years and 20 years, respectively. For retail investors, the coupon rates were 25 basis points higher.

The coupon offered by Hudco is slightly higher than REC, however, Hudco has a credit rating of AA+, one notch lower than REC's AAA.  The last day of the offering will be October 14, however, the issue can close earlier if it garners full subscription.

Tax-free bond issues have 40% reservation for retail investors (those investing less than Rs 10 lakh) and 20% each for the other three categories. The interest earned on tax-free bonds isn't taxable.

The government has allowed 13 public sector undertaking to raise up to Rs 48,000 crore by issuing tax-free bonds in the ongoing financial year to fund their long term infrastructure projects.