IRFC Ltd Tax Free Bonds issue Dec 2015

Published on Thursday, December 3, 2015 by Dilip Davda

Indian Railway Finance Corp Ltd (IRFC) is coming out with its tax free, Secured, Redeemable, NON-CONVERTIBLE BONDS OF FACE VALUE OF Rs. 1,000 EACH IN THE NATURE OF DEBENTURES HAVING TAX BENEFITS UNDER SECTION 10(15)(iv)(h) OF THE INCOME TAX ACT, 1961, AS AMENDED, ('BONDS') FOR AN AMOUNT OF Rs. 1000 crore ('BASE ISSUE SIZE') WITH AN OPTION TO RETAIN OVERSUBSCRIPTION UPTO Rs. 3532 crore AGGREGATING TO Rs. 4532 crore ('TRANCHE – I ISSUE').

IRFC is infrastructure finance company having tie up with Ministry of Railways for supplying rolling stock on lease. To meet is part funding requirements; the company is coming out with its 6th tax free bonds issue.

Minimum application is to be made for 5 bonds and in multiple of 1 bond thereon, thereafter. The company will be paying interest of 5% on refund money for the issue. Bonds are available in demat as well as in physical mode, however, trading will take place only in demat mode. Lead managers to this offer are SBI Capital Markets Limited, A.K. Capital Services Limited, ICICI Securities Limited, Edelweiss Financial Services Limited and RR Investors Capital Services Private Limited. The debenture trustee for the Issue is SBICAP Trustee Company Limited. Karvy Computershare Pvt Ltd is the registrar to the issue. These bonds are available for a tenure of 10 yrs, 15 yrs and 20 yrs and the coupon rates are at 7.07%, 7.28% and 7.25% for the respective tenures for non-retail category I,II and III while retail category is being offered interest rates at 7.32%, 7.53% and 7.50% for the said periods. Post allotment, these bonds will be listed on BSE, NSE.

This bond offer is graded as CRISIL AAA/Stable, ICRA AAA and CARE AAA by respective credit rating agencies. Instruments with this rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. Issue opens for subscription on 08.12.15 and will close on or before 21.12.15. Funds mobilized by this issue will be used towards financing the acquisition of rolling stock which will be leased to Ministry of Railways in line with the present business activities. Allocation ratio of this issue is 15% for QIBs, 20% for Corporate, 25% for HNIs and the rest (i.e. 40%) for retail.

On performance front, this company has been recording an EPS of Rs. 200 plus for last five fiscals and is having strong financial records.

Conclusion: As the interest rates are set to cool down going forward, this offer with above 7% tax free returns for longer tenure worth considering.

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. 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.