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IREDA Tax Free Bonds issue (Jan 2016) review

Published on Sunday, January 3, 2016 by Dilip Davda

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IREDA Tax Free Bonds issue (Jan 2016) review

Indian Renewable Energy Development Agency Limited (IREDA) is registered as a systematically important non deposit taking NBFC. It is set up by Govt. of India under the administrative control of MNRE to promote, develop and extend financial assistance for renewable energy and energy efficiency projects. The Union cabinet, in an ambitions push for solar energy has revised the cumulative target of grid Connected Solar Projects under Jawaharlal Nehru National Solar Mission (JNNSM) from 20,000 MW by 2021- 22 to 100,000 MW solar capacity by 2021-22. JNNSM will create an enabling policy framework to achieve this objective and make India a global leader in solar energy. The target of 100,000 MW will be met through 40,000 MW of rooftop solar projects and 60,000 MW of large and medium-scale grid-connected projects.

To meet its fund requirements, the company is coming out with a tax free bonds issue for a base size of Rs. 1000 crore with a green shoe option to retain oversubscription to the tune of Rs. 716 crore making the aggregate size of the issue of Rs. 1716 crore. The company is issuing tax free secured redeemable non convertible bonds of face value of Rs. 1,000 each, in the nature of debentures, having benefits under section 10(15)(iv)(h) of the Income Tax Act. Issue opens for subscription on 08.01.16 and will close on or before 22.01.16. Minimum application is to be made for 5 bonds and in multiple of 1 bond thereon, thereafter. These bonds carries coupon rates of 7.28% (10 yrs), 7.49% (15 yrs) and 7.43% (20 yrs) for category I, II and III (i.e. non-retails) and for retail it offers 7.53% (10 yrs), 7.74% (15 yrs) and 7.68% (20 yrs). Interest payment will be done annually.

Although these bonds are available in demat and physical mode, trading will take place only in demat mode. Post allotment bonds will be listed on BSE. These bonds are rated as ICRA AA+ by ICRA and IND AA + by India Rating and Research Pvt Ltd, indicating high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. Post this issue its current debt equity ratio of 3.07 will rise to 3.93. For last three fiscals, it has shown consistent growth in bottom line but at the same time its net NPA too surged from 0.93% to 3.84%. Funds raised from this issue will be used for financing/refinancing renewable energy and energy efficiency projects to the tune of 75% of the funds and the balance will be used as general corpus fund.

This issue is lead managed by Karvy Investors Services Ltd, A K Capital Services Ltd, Edelweiss Financial Services Ltd, IDBI Capital Market Services Ltd and RR Investors Capital Services Pvt Ltd. Karvy Computershare Pvt Ltd is the registrar to the issue. IL & FS Trust Co. Ltd is the debenture trustee.

Conclusion: As the rating of this offer is AA+ (lower than last four TFB issues by other PSUs), its coupon rates are little higher and thus appears lucrative. Investors may consider investment for long term tax free interest income.

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About Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com


8 Comments

Pramod Kumar Madan.
8. Pramod Kumar Madan.  Aug 29, 2016 14:21 Reply
I bought IREDA Bonds , Folio No.IRA0400420, Certificate No. 400420, I opted for Quarterly Interest to be paid in my bank account. Please send me the details of interest, if paid, and if not paid. when it shall be paid.. I would require a certificate also for the A/y 2017-18 also.
Please Inform me accordingly at the earliest by sms on my phone No as well by email..

Thanks . Pramod Kumar Madan. senior citizen.
buzzz me
7. buzzz me  Feb 8, 2016 14:57 Reply
When is the listing date?
Ak
6. Ak  Jan 19, 2016 12:19 Reply
Whats the current status? how much application has been received?
ACS
5. ACS  Jan 18, 2016 13:48 Reply
what is expected date of allotment and listing of bonds
Lokesha H
4. Lokesha H  Jan 16, 2016 10:09 Reply
I am interested in purchasing IREDA Tax free infrastructure bonds. Kindly advise how to purchase?
Dilip Davda
3. Dilip Davda  Jan 12, 2016 09:39 Reply
Issue finally oversubscribed around 3 times (on aggregate size) and 5.14 times (on base size) with HNI at 2.06 times and Retail around 1.91 times on the aggregate size and thus chances of allotment in both these categories are around 50%. Issue closing announcement came on 11.01.16 and thus few more additions took place on closing day.
krishna
2. krishna  Jan 9, 2016 10:46 Reply
I would like to know if i did purchase these bonds from the market then also do I eligible for the tax free interest. Please kindly help in this respect.
vinod
1. vinod  Jan 7, 2016 12:43 Reply
Isme karne jesa he ya nahi



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