Hudco To Float Rs 870cr Bonds Issue

The Housing and Urban Development Corporation (Hudco) has decided to launch a Rs 870-crore bond issue as part of its plan to mobilise resources for fiscal 1998-99.

Of the total issue amount, Rs 435 crore would comprise tax-free bonds while the remaining amount would be under the taxable category. Though a deal is yet to be finalised, Hudco is expected to rope in SBI Caps as the issue manager.

The taxable bonds would have a lock-in period of seven and 10 years. Hudco is working out interest rates as low as 12.5-13 per cent for bonds with a seven-year lock-in period and 13-13.5 per cent for bonds with a 10-year lock-in period. The date of the issue will be finalised by the Hudco board shortly.

 

For the tax-free bonds, Hudco is working on getting the benefits of Section 10(23)G of the Income Tax Act which extends tax exemptions to investments in infrastructure projects. Hudco proposes to utilise the credit mobilised in the financing of city infrastructure projects, including those of water supply management, solid waste management, sanitation and sewerage management among others.

Hudco chairman V Suresh told Business Standard: Hudco has been able to raise funds at very low rates compared to other organisations due to the strong fundamentals of the Corporation. Even this year, we propose to keep low interest rates for our bonds. The bond proceeds would be used primarily for both housing as well as infrastructure projects with 60 pre cent of the proceeds used for giving housing loans while the rest will be used for projects for city infrastructure.

Hudco has chalked out plans to raise Rs 2,025 crore during 1998-99, an increase of Rs 85 crore over the current fiscals mobilisation of Rs 1,960 crore. Besides the bonds issue, Hudco would also introduce a public deposit scheme with a maturity period of at least five years.

The public deposit scheme having a minimum holding period of five years is desirable since it would balance our cash inflows and withdrawals. So far, these schemes had a holding period of two to three years which had lead to mismatches in our inflows and outflows, said Suresh.

Hudco had opted for an infrastructure bond issue of Rs 200 crore in March 1997. This was followed up by a Rs 337-crore bond issue in August 1997 through private placement. Of the total, Hudco had raised Rs 100 crore in tax-free bonds at an interest rate of 8.75 percent. The remaining Rs 235-crore taxable bonds had a lock-in period of seven and 10 years at an interest rate of 12.5 and 13 per cent, respectively.