Tax free bonds of NTPC get massive response

GN Bureau | September 24, 2015


#Tax free   #tax   #NTPC   #PFC   #Indian Renewable Energy Development Agency   #IREDA  


NTPC’s public issue of tax-free bonds received a massive response from investors with the subscription amount touching Rs 4,417.58 crore. The total issue size is of Rs 700 crore. The highest subscription came from corporates at eight times the issue size followed by retail individual investors at over six times the size.

NTPC had earlier raised Rs 300 crore through private placement of tax-free bonds. It was allotted a total of Rs 1,000 crore to be raised through tax-free bonds this fiscal year.

The response of the investors is being attributed to the fact that tax-free bonds have made a comeback to the market after a period of one year. “This is due to the fact that tax-free bonds are entering the market after having remained absent in the last fiscal year. Moreover, since this is the first public issue in this fiscal, combined with the fact that interest rates are falling, investors want to lock-in their money at as higher yields as possible. That is why we saw such a huge subscription,” said Ajay Manglunia, executive vice-president-fixed income, Edelweiss Securities.

PFC to offer bonds
Meanwhile, Power Finance Corporation (PFC), another state-owned company has been permitted to issue tax-free bonds worth Rs 1,000 crore and it is set to hit the market with its public issue in the first week of October.

The issue is set to open on October 5, market participants said. PFC had earlier raised Rs 300 crore through private placement of its tax-free bonds at 7.16%, according to bond market sources.

Market participants indicated that the bonds will have coupon rates of 7.36%, 7.52% and 7.60% on its 10, 15 and 20-year issues respectively for retail individual investors while it will carry yields of 7.11%, 7.27% and 7.35% for institutionals, corporates and HNIs.

The PFC will also seek the shareholders' approval for raising up to Rs 60,000 crore through issue of securities. PFC is a one of the leading lenders to the power sector.

The company proposes "... to raise funds up to Rs 60,000 crore through issue of bonds/debentures/notes/debt securities or private placement basis in India and/or outside India,".

The approval for raising funds will be sought from shareholders in the annual general meeting being held today (September 24), the company said in a regulatory filing. PFC, an infrastructure finance company, is engaged in providing financial assistance to state power utilities for meeting the financing and development requirements of the power sector. Government's five per cent stake sale in power sector lender PFC recently was lapped up by investors, fetching about Rs 1,600 crore to the exchequer.

Indian Renewable Energy Development Agency (IREDA), which has been allotted a limit of Rs 2,000 crore, is likely to tap the markets soon. While 70% of the amount has to be raised through public issue of the tax-free bonds, the rest, i.e., Rs 600 crore, could be raised through private placement, according to the government notification.

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