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NHAI Tax Free Bonds Tranche II issue review

Published on Thursday, February 25, 2016 by Dilip Davda

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NHAI Tax Free Bonds Tranche II issue review

National Highways Authority of India, an autonomous body under the Ministry of Road Transport & Highways, Government of India is issuing second tranche of its tax free bonds issue. As known, it came out with its first tranche of such bonds in December 2015 and collected over Rs. 22155 crore against the aggregate size of Rs. 10000 crore. Heavy oversubscription came for all other categories except for the retail investors.

Now it is coming out with its second Tranche to mobilize Rs. 500 crore with a green shoe option to retain oversubscription to the extent of Rs. 3300 crore (the aggregate size). Issue opens for subscription on 24.02.16 and will close on or before 01.03.16. Bonds are having a face value of Rs. 1000 each. Minimum application is to be made for 5 bonds and in multiple of 1 bond thereon, thereafter. These bonds carry coupon rates of 7.04% (10 yrs) and 7.39% (15 years) for all other categories except retail investors. For retail investors the coupon rates are 7.29% (for 10 years) and 7.69% (for 15 years). These bonds are available in physical as well as in demat mode. However, trading will take place only in demat mode. Post allotment, it will be listed on BSE and NSE. Allotment will be made on first come- first served basis. Its current debt equity ratio of 0.21 will rise to 0.24 after this issue.

These bonds are rates as "IND AAA" by IRRPL, "CARE AAA" by CARE, "ICRA AAA" by ICRA and "CRISIL AAA/Stable" by CRISIL. These rating indicate the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk. Lead managers to the issue are SBI Capital Markets Ltd, A K Capital Services Ltd, Axis Capital Ltd, Edelweiss Financial Services Ltd and ICICI Securities Ltd. SBI Cap Trustee Co. Ltd is the Trustee for the bond holders and Karvy Computershare Pvt Ltd is the registrar to the issue.

Company has suffered a setback due to slowdown in infra projects related to roads. But as we are now seeing major investment lined up for road infra developments, this company will regain its lost glory once again. As its debt-equity ratio is at a comfort level, it can raise the necessary funds to speed up the developments.

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

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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


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