IDFC is coming out with the country’s first ever public issue of infrastructure bonds through which the lender expects to mop up Rs 3,400 crore. The issue would open on September 30 and closes on October 18.  It is the first public issue of bonds by an infrastructure finance company under Sec 80CCF of the Income Tax Act that allows tax benefits for investment in long-term infrastructure bonds. The bond issue proceed would be utilised to finance the infrastructure projects in the country.

Salient features of the issue

  • First public issue of bonds by an infrastructure finance company under Sec 80 CCF
  • Credit rating agency ICRA has rated the Bonds under this offer as “LAAA” with stable outlook, indicating highest safety
  • These bonds will be issued only to Resident Indian Individuals (Major) and HUF.
  • LAAA Credit rating by ICRA , indicating highest level of safety
  • 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 Bonds bear an attractive combination of coupon rate ranging between 7.5% and 8% p.a coupled with tax benefits of upto Rs 20,000 under Sec 80 CCF.
  • Resident Indian individuals and HUFs eligible for deduction of up to Rs 20,000 in computation of taxable income for the current financial year.
  • There are 4 investment options, suiting the needs of different categories of investors.
  • No TDS shall be deducted.
  • The bonds will be listed on NSE & BSE and can be traded after the 5 year lock – in period.
  • Investors can mortgage or pledge these bonds to avail loans after the lock-in period.
  • Under Section 80 CCF of the I.T. Act, an investor in such infrastructure bonds will be entitled to tax deduction of investments of up to Rs 20,000. The deduction is over and above the Rs 1,00,000 deduction available under section 80C, 80CCC & 80CCD read with section 80CCE.
  • 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.

Investors to benefit from 80 CCF Benefits:

  • The Bonds are classified as “long term infrastructure bonds” and are being issued in terms of section 80 CCF of the Income Tax Act.
  • Bonds offer an additional window of tax deduction of investments of up to Rs 20,000
  • The deduction is over and above the Rs 1,00,000 deduction available under section 80C, 80CCC & 80CCD read with section 80CCE
  • It helps in intermediating the retail investor’s savings into infrastructure sector directly.
  • In the event that any applicant applies for the bonds in excess of Rs 20,000 p.a., the aforestated tax benefit shall be available to such applicant only to the extent of Rs 20,000 p.a.

Issue Structure:

Maturity: The Bonds, with a maturity of 10 years, will be issued in 4 series.

Face Value: Each Bond of face value of Rs 5,000 each.

Minimum application: Rs 10,000 or 2 bonds. The bonds can be of the same series or 2 bonds across different series.

Lock in: 5 years from the date of allotment.

Buyback facility: Available for Series 3 & 4 only.

Issue summary

Issue opens: 30th Sept 10

Issue closes: 18th Oct 10

Lead managers: ENAM Securities Private Limited, Citigroup Global Markets, Kotak Mahindra Capital Co. Ltd

Registrar: Karvy Computershare Pvt. Ltd.

Debenture Trustees: IDBI Trusteeship Services Ltd.

Credit rating by ICRA

Rating Issue Type
LAAA Infrastructure Bonds

The rating of ICRA indicates highest safety and stable outlook. The ratings provided by CARE may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any other rating.

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.

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