Does it male sense to invest in Infrastructure bond?
If you happen to be in the highest tax bracket then by Investing Rs 20000/- you would get a tax rebate of Rs. 6000/-. Considering you have invested 14000/-(Rs.20000-Rs.6000 tax benefit) then you would be earning 8% interest annualy on Rs.20000/- you would be getting maturity of Rs. 43200/-.So your Rs. 14000/- becomes Rs. 43200/- after 10 years which is more than 3 times offering you Net Yield of greater than 12.5%. This kind of return is not available in any secured & guaranteed Investments.
Also these bonds can be traded in exchange after 5 years, supposedly interest rate falls in the future then these bonds will trade at premium offering capital gains to your investment. Buyback option is available after 5 years. These 2 features makes Infrastructure bond Highly liquid after 5years.
To sum it up, Investment in Infrastructure bond is highly recommended if you fall under highest tax slab as investment in these offer Rebate of Upto Rs 20000/- over and above investment limit of 1 lac under section 80C
Details of IDFC Infrastructure Bond Tranche 2 opening on 17th January 2010
Infrastructure Development Finance Company Limited (“the Company” or “IDFC”) has announced a public issue of its second tranche of secured, redeemable, long term infrastructure bonds having tax benefits under Section 80 CCF of the Income Tax Act,1961 (“Tranche 2 Bonds”) for an amount not exceeding Rs. 2,928.96 Crore (the “Issue”) . The Tranche 2 Bonds will be issued on the terms set out in the prospectus filed by IDFC with the Registrar of Companies (ROC), Tamil Nadu. The issue proceeds are proposed to be used for the Company’s infrastructure lending activities. IDFC has the authority to raise up to Rs 3,400 crore in one or more tranches during fiscal 2011. It has already raised Rs. 471 crore in the first tranche of bonds issued on the terms set out in Prospectus – Tranche 1 in November, 2010.
Important dates: The issue will open for subscription from Monday, January 17, 2011 and will close on Friday February 4, 2011, or on such earlier date or extended date, as may be decided by the Board subject to necessary approvals.
Issue Structure : The Tranche 2 Bonds, with a maturity of ten years, will be issued in two series.
Series-1 : Carry a 8% coupon, payable annually
Series-2 : Cumulative option, 8% coupon, compounded annually
Features of Bond:
1. Minimum Investment Two Bonds in multiple of one bond thereafter, maximum no limit.
2. Deduction U/S 80CCF of Rs 20000.00 addition to Rs 100000.00 in 80C
3. Interest rate 8.00%
4. Buy back facility available after 5 years.
5. Available in both Physical and Demat Mode
The bonds will be issued in both dematerialised and physical (paper) forms as SEBI has allowed the Company to issue the bonds in physical form and therefore it is not necessary for potential investors to have demat accounts
Listing : The Tranche 2 Bonds are proposed to be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The Tranche 2 Bonds are subject to statutory lock-in for a period of five years from the deemed date of allotment. No trading would be permitted in the Tranche 2 Bonds during the said lock-in period.
Ratings by two agencies : Credit rating agency ICRA has assigned ‘LAAA’ rating to the Tranche 2 Bonds. The rating indicates stable outlook and highest safety. Credit rating agency Fitch has rated the Tranche 2 Bonds as “AAA (Ind)”, indicating stable outlook.
