NABARD Tax Free Bonds (TFB) Issue Review - March 2016

Published on Saturday, March 5, 2016 by Dilip Davda

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NABARD Tax Free Bonds (TFB) Issue Review - March 2016

National Bank for Agriculture and Rural Development (NABARD) is an apex development institution in India, having its headquarters in Mumbai (Maharashtra). NABARD has amandate under the NABARD Act to facilitate credit and other facilities for the promotion and development of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas in India with a view to promoting integrated rural development. It was established on July 12, 1982 by a special Act of Parliament and its main focus has since been the upliftment and development of rural India by increasing the credit flow for elevation of agriculture and rural non-farm sector. It completed 34 years on January 1, 2016. It has been entrusted with matters concerning policy, planning and operations in the field of credit for agriculture and other economic activities in rural areas in India. As on March 31, 2015, NABARD operates throughout the country through its 31 Regional Offices, a cell at Srinagar and Training establishments at Lucknow, Bolpur and Mangalore. It also has 400 District Development Offices across the country as of March 31, 2015. It also has the mandate to support all other allied economic activities in rural areas, promote integrated and sustainable rural development and secure prosperity of rural areas.

NABARD got permission to issue Tax Free Bonds (TFBs) to the tune of Rs 5,000 crore during 2015-16. The Bonds are with tenures of 10, 15 and 20 years. Out of the total allocation, Rs 1500 cr (30%) has been mobilized through Private Placement from Institutional Investors. The balance of Rs 3500 cr (70% of total Issue size) is being mobilized by way of Public Issue that is opening on 9 March 2016 and will close on or before 14.03.16. In this Public Issue Rs 2100 cr (60%) shall be for Retail Individual Investors investing up to Rs 10 lakh. The balance of Rs 1400 cr will be mobilized from Qualified Institutional Buyers (QIB) (15%), Corporate (15%) and HNIs (10%). Funds so raised will be utilized to finance various irrigation projects. Bonds are having a face value of Rs. 1000 each and minimum application is to be made for 5 bonds (i.e. Rs. 5000) and multiple of 1 bond thereon, thereafter. Bonds have tenure of 10 and 15 years and is offering coupon rate of 7.04% and 7.35% to all categories other than retail investors and retail investors are offered coupon rates of 7.29% and 7.64% for the said tenures. Allotment will be made on first come - first served basis. Although bonds are available in demat and physical modes, trading will take place only in demat mode. Issue is lead managed by A K Capital Services Ltd, Edelweiss Financial Services Ltd, ICICI Securities Ltd, RR Investors Capital Services Pvt Ltd and SBI Capital Markets Ltd. Axis Trustee Services Ltd is the bond trustee and Link Intime India Pvt Ltd is the registrar to the issue. Its Debt/Equity ratio will rise to 9.57 post this issue from 9.38 at present.

These bonds are rated as CRISIL AAA/Stable by CRISIL and IND AAA/Stable by India Ratings indicating highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. Post allotment, these bonds will be listed on BSE.

NABARD has progressed well and its paid up equity has gone up from Rs. 2000 crore in FY 2011 to Rs. 5000 crore in FY 15. Similarly its free reserves too have gone up from Rs. 11863 crore to Rs. 19601 crore for the said periods.

Conclusion: As the Budget 2016-17 has proposed higher spending for irrigation sector that is expected to rise further in coming years. Interest rates too are expected 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.



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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


1 Comments

Chickoo
1. Chickoo  Mar 15, 2016 19:07 I Like It. | I Don't Like It. | Report Abuse Reply
Dear dilip,

Where we can buy or invest into these bonds,nabard, nhai, ireda..








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