Housing and Urban Development Corporation Limited (HUDCO) was established in 1970 as a wholly owned Government company with the objective to provide long term finance and undertake housing and urban infrastructure development programmes. HUDCO’s sustained performance and profitability earned them Mini-Ratna status conferred in FY 05. HUDCO had sanctioned loans of Rs. 37,464 cr for housing and Rs. 84,906 cr for urban infrastructure on a cumulative basis up to Dec 2011.

The Company has filed Draft Shelf Prospectus with SEBI on 11th January 201 and Issue of tax Free Bonds expected to be launched by the end January 2012.

Salient features of the proposed bond issue

1. The Bonds are issued in the form of tax-free, secured, redeemable, non-convertible Debentures and the interest on the Bonds will not form part of the total income.

2. In case of over-subscription; allotment shall be on first cum first serve basis up to the date falling 1 day prior to the date of oversubscription and on proportionate basis on the date of oversubscription, in the manner specified in the Tranche Prospectus.

3. CARE has assigned a rating of ‘CARE AA+’ to the Bonds. Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. Fitch has assigned a rating of ‘Fitch AA+ (ind)’ to the Bonds.

4. The bonds are secured by way of floating first pari passu charge on the present and future receivables of the company to the extent of amount mobilized under the issue. The security cover will be atleast 100% of the outstanding Bonds at any point in time.

5. HUDCO shall pay [xx] % p.a. for Tranche 1 Bonds as interest on the Application amount retained. HUDCO shall also pay [xx]% p.a. on refund of application amount. Such interest shall be paid along with the monies liable to be refunded.

6. Bonds will be issued in Dematerialised form or physical form as specified by an Applicant in the Application Form. The bonds will be listed on NSE and BSE both and will be available in Demat form facilitating trading of these bonds.

7. Investors can pledge or hypothecate these bonds to avail loans.

Tax Benefits

1. The income by way of interest on these Bonds shall not form part of total income as per provisions under section 10 (15) (iv) (h) of I.T. Act, 1961;

2. There shall be no deduction of tax at source from the interest, which accrues to the bondholders;

3. As per provisions under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed Bond is treated as a long term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer. Under section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being listed securities are subject to tax at the rate of 20% of capital gains calculated after reducing indexed cost of acquisition or 10% of capital gains without indexation of the cost of acquisition;

4. Wealth Tax is not levied on investment in Bond under section 2(ea) of the Wealth-tax Act, 1957.

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February 2024