IDFC may raise Rs2,000-2,500 crore via tax-free bonds

IDFC may raise Rs2,000-2,500 crore via tax-free bonds

Mumbai: Infrastructure Development Finance Company (IDFC) could raise Rs20-25 billion in FY11 by issuing tax-free infrastructure bonds to investors, a senior official said on Thursday.

“There is a limit by regulation...that would basically mean that we could raise approximately Rs2,000-2,500 crores of tax free infrastructure bonds," L.K. Narayan, group chief financial officer, said at an analyst conference call.

India plans to issue tax-free bonds with a minimum tenure of 10 years to invest to improve its basic infrastructure. The bonds have the potential to raise about $6.5 billion in fiscal 2010-11, government estimates showed.

Recently, government allowed IDFC and others including Industrial Finance Corporation, Life Insurance Corporation and other non-banking infrastructure finance companies, approved by the central bank to issue such bonds.

The nature of these bonds suggest that they would be attractive to retail investors whose annual income profiles are in the range of Rs0.3-1 million and to distribute these bonds to retail investors would be a challenge, senior IDFC officials said.

“This is going to be a potentially tough but very interesting opportunity for us, that we will have to very methodically position ourselves and distribute the product," said Rajiv Lall, chief executive and managing director, IDFC.

IDFC will be able to give more clarity on the product over the next quarter, he added.

Interest rates on these bonds are capped to interest rate on equivalent government bonds, Narayan said.

On Wednesday, the firm reported a 23% rise in April-June net profit to Rs3.35 billion.

At 1:05 p.m, shares in the firm were trading down 0.56% at Rs185 in a Mumbai market that was trading up 0.13%.