Rural Electrification Corp Tax Free Bonds IPO Review

Published on Saturday, October 24, 2015 by Dilip Davda

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Rural Electrification Corp Tax Free Bonds IPO Review

Rural Electrification Corporation Ltd (REC) is a Government of India undertaking and engaged in power sector. REC is coming out with its TAX FREE SECURED REDEEMABLE NON CONVERTIBLE BONDS (TFB) OF FACE VALUE OF RS. 1000 EACH IN THE NATURE OF DEBENTURES HAVING TAX BENEFITS UNDER SECTION 10 (15)(iv)(h) OF THE INCOME TAX ACT, 1961, AS AMENDED ("INCOME TAX ACT") for Rs. 300 crore and having a permission to retain oversubscription of Rs. 400 crore making aggregate size of the issue for Rs. 700 crore. The utilization of Issue Proceeds shall be in compliance with various guidelines/regulations/clarifications issued by RBI, SEBI or any other statutory authority from time to time. The funds raised through this Issue will only be utilised towards general lending operations of our Company and other associated business objectives subject to the restrictions contained in the Foreign Exchange Management (Borrowing and Lending in Rupee) Regulations, 2000 and other applicable statutory and / or regulatory requirements. Further, the amount to be utilised towards "General Corporate Purposes", shall not exceed 25% of the amount raised by our Company in the proposed issue.

Allotment is available in demat as well as physical mode, however, trading will take place only in demat mode. Issue opens for subscription on 27.10.15 and will close on or before 04.11.15. Allotment will be on "first come-first serve basis". Minimum application is to be made for 5 TFBs and in multiple of 1 TFB thereon, thereafter. These bonds have tenure of 10 yrs, 15 yrs and 20 yrs and coupon rate of 6.89%, 7.09% and 7.18% for the said tenures for other then retail investors. For retail investors, coupon rates are 7.14%, 7.34% and 7.43% for the said tenures. These bonds are grades as CRISIL AAA/Stable by CRISIL, CARE AAA by CARE, IND AAA/Stable by India Rating and ICRA AAA by ICRA, indicating the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry lowest credit risk.

Issue is jointly lead managed by A K Capital Services Ltd, Edelweiss Financial Services Ltd and RR Investors Capital Services Pvt Ltd and Karvy Computershare Pvt Ltd is the registrar to the issue. SBICAP Trustee Co. Ltd is the Trustee for the bond holders. Post allotment, TFBs will be listed on BSE.

Conclusion: In line with eased interest rates, this offer is having lower coupon rates than the recent two offers of NTPC and PFC, but considering its rating and tax free status, it is worth considering for long term safe tax free returns.

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


3 Comments

GURDEEP SINGH
3. GURDEEP SINGH  Nov 10, 2015 09:28 I Like It. | I Don't Like It. | Report Abuse Reply
today listing of REC in BSE code 933538,933540,933542,933544,933548
GURDEEP SINGH
3.1. GURDEEP SINGH  Nov 10, 2015 09:29 I Like It. | I Don't Like It. | Report Abuse
today listing in BSE code 935538,935540,935542,935544,935548
GURDEEP SINGH
2. GURDEEP SINGH  Nov 9, 2015 11:55 I Like It. | I Don't Like It. | Report Abuse Reply
Any Information of Listing in BSE ?
GURDEEP SINGH
1. GURDEEP SINGH  Nov 4, 2015 12:17 I Like It. | I Don't Like It. | Report Abuse Reply
ALLOTMENT KAB HOGI
Gaurav Halwasia
4.1. Gaurav Halwasia  Nov 6, 2015 09:46 I Like It. | I Don't Like It. | Report Abuse
I see the allotment now in my ICICIdirect demat account.








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