IRFC Bonds Oversubscribed Four Times

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Tax-free public bonds continue to be a big draw for investors. The bond issue of Indian Railways Finance Corporation (IRFC) was oversubscribed by over four times on the very first day of the issue opening for public subscription, as cash-rich corporates and high net worth individuals aggressively latched onto the opportunity to earn over 11% of post-tax returns. With the interest received being tax-free, the effective post-tax returns for individuals in the highest tax bracket will be about 12%. The issue size is. 3,000crore,witha green shoe option of another . 3,300 crore. The issue received subscriptions for . 13,255 crore on Friday.

In the qualified institutional buyers category, subscriptions worth . 10,608 crore were received for a reserved limit of . 2,835 crore. In the high net worth individuals category, the issued received subscriptions worth . 2,647 crore as against a limit of . 1,575 crore.

The issue is still open for retail investors — that is, investors with application size of less than . 5 lakh.

Not even half the reserved limit for the retail section has been subscribed to so far. Against the limit of about . 1,890 crore for the retail segment, the issue received subscriptions for only . 738 crore.

For retail investors, the coupon rateofferedis8.30%for15yearsand 8.15% for 10 years. Institutional investors will receive a coupon of 7.90% for 10-year bonds and 8.05% for 15-years bond.

The coupon rate was reduced for institutional investors since they buy these bonds for trading and not necessarily for holding them till maturity. The IRFC wanted to encourage retail investors who would invest for the long term,.

The issue comes with a step-down clause — only the original allottee will receive the coupon of 8.15% to 8.30%.

Once these bonds are sold in the secondary market, the coupon rate would reduce to 7.90% to 8.05%, depending on the tenor of the bond. The bonds issued by National Highway Authority of India and Power Finance Corporation earlier this month, too, got huge response. NHAI raised . 10,000 crore, while PFC raised . 4,033 crore.

 

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Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. HDFC TaxSaver
2. ICICI Prudential Tax Plan
3. DSP BlackRock Tax Saver Fund
4. Birla Sun Life Tax Relief '96
5. Reliance Tax Saver (ELSS) Fund
6. IDFC Tax Advantage (ELSS) Fund
7. SBI Magnum Tax Gain Scheme 1993
8. Sundaram Tax Saver

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Current open Infra Bond Application form

 

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