IIFCL plans Rs1,200-cr tax-free retail bond in Q4

IIFCL plans Rs1,200-cr tax-free retail bond in Q4

Mumbai: The state-run core sector lender India Infrastructure Finance Company (IIFCL) on Saturday said it will come out with a Rs1,200-crore retail infra bond issue from January through March.

“We will launch Rs1,200-crore tax-free infrastructure bonds this fiscal. It will hit the markets in three tranches of Rs400 crore each," IIFCL chairman and managing director SK Goel told newsmen on the sidelines of the last day of the annual bankers’ summit here.

These three-legged bond issue will hit the markets in January, February and March, he said.

“I am sure of a successful completion of these bonds as the last quarter generally attracts investment interest from retail investors," Goel said.

He said this in response to a question on whether he is confident of attracting enough investors to these issue as from January onwards the market will be flooded with a couple of big-ticket secondary issues from the oil PSUs like IndianOil and other smaller ones as well.

Goel pointed out that issues from IFCI, IDFC, L&T from August through November came a cropper because of the poor timing.

It can be noted that as these issues were in the market, the country’s largest IPO till date hit the markets from Coal India in October and became a huge success, thus making these long term bonds less attractive to retail investors.

While the Rs100-crore retail tax-free bond from infra financier IIFCL with a green-shoe option evoked only tepid response, the Rs600-crore IDFC issue had poor response in October, forcing it extend the timing.

The tepid response had forced the L&T Infrastructure Finance to extend the date for its Rs200 crore issue twice.

In the last Budget, finance minister Pranab Mukherjee had announced a new income tax section 80CCF entitling taxpayers to exemption on money invested in infrastructure bonds upto Rs20,000 a year.

Under this scheme, institutions that qualify as infrastructure financing companies can launch retail tax-free long-term bonds with a minimum of 10-year tenor and a coupon rate not exceeding government securities.

This effort is part of the government efforts at mobilising money for part-funding the massive $1-trillion infra spend it has planned for the 12th Plan.

Towards, this, the government has also instituted a Rs50,000-crore infra corpus.

Goel said the proposed bonds are AAA-rated and will carry a coupon rate of around 8.5% for 10 years and 8.75% for 15 years.

The top official of the company also said IIFCL, which is sitting on a Rs20,000-crore surplus liquidity will be getting Rs8,000 crore capital infusion from the government within a month.

On his company’s lending target for this fiscal, Goel said, already they have disbursed Rs7,000 crore of the targeted Rs11,000 crore.

On take-out financing, Goel said, the company has already met 50% of its target of Rs3,000 crore fiscal so far.

Take-out finance refers to a financial institution taking over the credit from the original lender, and is applicable to long-term infrastructure funding.

Under this the credit facility extended to the borrower will be borne on the books of the original lender till it is taken over.

The institution agreeing to take over on its part will have to reflect in its books this obligation as a contingent liability till it actually takes over with partial or full credit risk as agreed upon.

Take-out financing is an enabling proposal for infra lenders and will increase liquidity in the system as the repayment from infra funds have staggered over long term as typically infra projects have long gestation periods.

IIFCL has a take-out finance plan of Rs25,000 crore over the next three years, Goel said.

He also said of the Rs10,000-crore refinancing target for the fiscal, he has already met Rs6,000 crore.