IDFC to issue tax-saving long-term infrastructure bonds
- First public issue of bonds by an infrastructure finance company under Sec 80CCF
- Resident Indian individuals and HUFs eligible for deduction of up to Rs 20,000 in computation of taxable income for the current financial year
- LAAA Credit rating by ICRA, indicating highest level of safety
- Issue opens September 30, 2010 and closes October 18, 2010
- To be issued in four series, with different interest payment and buyback options
- Proposed to be listed on BSE and NSE. The bonds are tradable post lock-in period of five years.
Infrastructure Development Finance Company Limited (“the Company” or “IDFC”) has announced a public issue of long term infrastructure bonds to raise an amount of up to Rs 3400 crore, in one or more tranches, in the financial year 2010-11. The issue proceeds are proposed to be used for the Company’s infrastructure lending activities.
Relevant dates: The issue shall open for subscription from Thursday, September 30, 2010, and shall close on Monday, October 18, 2010, or earlier, as may be decided by the Board.
Issue Structure: The Bonds, with a maturity of ten years, will be issued in four series.
- Series-1: Carry a 8% coupon, payable annually
- Series-2: Cumulative option, 8% coupon, compounded annually
- Series-3: Carry a 7.50 % coupon, payable annually; with a buyback option#
- Series-4: Cumulative option, 7.50% coupon, compounded annually; with a buyback option#
Listing: The Bonds are proposed to be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The Bonds are subject to statutory lock-in for a period of five years from the deemed date of allotment. No trading would be permitted in the Bonds during the said lock-in period.
Rating: Credit rating agency ICRA has rated the Bonds under this offer as “LAAA” with stable outlook, indicating highest safety.
Security: The bonds are fully secured with first floating pari pasu charge over certain receivables of the Company and first fixed pari pasu charge over specified immovable properties of the Company. The security cover is 1.0 times of the outstanding Bonds at any point in time.
The profile on the four series of Bonds is as under:
| Series of Bonds | Coupon | Interest payment | Buyback# | Listing |
| Series-1 | 8.00% | Annually | N | Y |
| Series-2 | 8.00% | Cumulative | N | Y |
| Series-3 | 7.50% | Annually | Y | Y |
| Series-4 | 7.50% | Cumulative | Y | Y |
| #: after expiry of lock in | ||||
80CCF benefit: The Bonds are classified as “long term infrastructure bonds” and are being issued in terms of section 80CCF of the Income Tax Act. In terms of the notification of Section 80CCF, an amount, not exceeding Rs. 20,000 per annum, paid or deposited as subscription to long term infrastructure bonds during the previous year relevant to the assessment year beginning April 01, 2011 shall be deducted in computing the taxable income of a resident individual or Hindu Undivided Family (HUF). In the event that any applicant applies for the bonds in excess of Rs. 20,000 per annum, the aforestated tax benefit shall be available to such applicant only to the extent of Rs. 20,000 per annum.
The Lead Managers to the Issue are Citigroup Global Markets India Private Limited, Enam Securities Private Limited, Kotak Mahindra Capital Company Limited, and IDFC Capital Limited. IDBI Trusteeship Services Limited, is the debenture trustee for the Bonds.
About IDFC
IDFC is a leading knowledge-driven financial services company in India and plays a central role in advancing infrastructure development in the country. The Company provides a full range of financing solutions to its clients. Established in 1997 as a private sector enterprise by a consortium of public and private investors, the Company listed its Equity Shares in India pursuant to an initial public offering in August 2005.
Disclaimer
All investors proposing to participate in the public issue of Long Term Infrastructure Bonds by the Infrastructure Development Finance Company Limited should invest only on the basis of information contained in the Prospectus –Tranche 1 filed with Registrar of Companies, Tamil Nadu. The Prospectus – Tranche 1 is available on the website of SEBI at www.sebi.gov.in, the websites of the Lead Managers at www.citibank.co.in, www.enam.com, www.kmcc.co.in and www.idfccapital.com, and the website of the Company at www.idfc.com.