State-owned India Infrastructure Finance Company Ltd (IIFCL) plans to mop-up Rs1,200 crore through issue of infrastructure bonds.
The issue opens on February 4 and closes on March 4.
These bonds are classified as “long-term infrastructure bonds” under Sec 80CCF of the IT Act for tax-saving investments, allowing for a deduction of Rs 20,000 over and above the Rs1 lakh deduction available under section 80C.
These bonds can be issued by those classified as infrastructure finance company by the Reserve Bank of India. Last year, the government approved the issuance of long term tax-free bonds, after which Industrial Finance Corporation of India (IFCI) and Rural Electrification Corporation (REC) raised money through private placements.
IIFCL will offer bonds in four different series. Series I and II are 10-year bonds offering 8.15% compounded annually, where as series III and IV are 15-year bonds offering 8.30%, which is higher than the 7.5—8% offered by earlier issuers such as IDFC, L&T Finance and IFCI. Series I and II have a lock-in of 5 years and interest is paid annually against III and IV whose lock-in is 7 years following the cumulative mode of interest payment. The bonds will be tradable on BSE and NSE after their respective lock-ins. The bonds will be issued at a face value of Rs1,000 and one has to apply for a minimum of five bonds aggregating applications across all series, therefore not investing the entire amount in one particular series.
IIFCL Bonds have received AAA rating by CRISIL and CARE, which indicates safety.
The lead managers to the issue are I-Sec, SBI Caps, AK Capital, Bajaj Capital, Enam, Karvy investor Services, RR Investors & Yes Bank.
IIFCL, set up by the government in 2006, had net sanctions of Rs21,691 crore and disbursements of Rs11,416 crore as on September 30, 2010. About half the sanctions are in the power sector, 40% in roads and the rest in urban infrastructure, ports and airports. The company is targeting disbursements of Rs10,000 crore for this fiscal. The company reported revenues and profit of tax of Rs928 crore and Rs128 crore in the second quarter.
IIFCL has four areas of operations - direct landing, refinancing, takeout financing and foreign currency lending through its subsidiary, IIFCL UK.
Asked of the status of the takeout financing scheme, chairman & managing director S K Goel said a lot of have banks have approached IIFCL. “We started it only in October and by March we’ll have a clear picture,” he stated.
Under takeout financing, a bank can transfer a part of its loans to IIFCL after the projects have become operational, for which the bank pays the infrastructure financier a commission.
IIFCL is allowed to take over up to 75% of a single loan. This frees up capital for the bank so that it can lend to more projects. India plans to spend $1 trillion (Rs47 lakh crore), or 9.95% of its GDP, on infrastructure development during the Twelfth Five Year Plan (2012-2017), nearly double the spend in the current Plan. Moreover, about half the $1 trillion will be private capital. It is 30% now.
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