HUDCO Tax Free Bonds – Tranche 2
DSIJ Intelligence / 21 Feb 2013
Like most other companies, HUDCO too has come up with its Tranche 2 of Tax free bonds with a couple of tenure options.
It looks like most companies are tapping the markets to raise funds by issuing Tax free bonds. Although most of them had raised funds through bonds earlier, they are now coming up with their second Tranche. If one broadly recollects, PFC Tranche 2 bond has already hit the stands (currently going on) and it is now time for HUDCO.
HUDCO Tranche 1 issue had received an overwhelming response from investors. The issue size was of Rs 750 crore, with an option to retain over-subscription up to Rs 5000 crore. One should note that as per CBDT, the company is allowed to raise funds upto Rs 5000 crore in FY13. The issue was oversubscribed three times and the company managed to raise around Rs 2216 crore through its first Tranche. This time, in its second tranche, the company wishes to raise up to Rs 500 crore with an option to retain the residual limit of Rs 2806 crore.
| HUDCO – Tranche 2 – Issue Information | ||
|---|---|---|
| Particulars | Option I | Option II |
| Face Value | Rs 1,000 | |
| Minimum Application | Rs 5000 (i.e. 5 Bonds) | |
| Horizon | 10 Years | 15 Years |
| Coupon for Retail Individual (% p.a.) | 7.53 | 7.69 |
| Interest Payment | Annual | Annual |
| Issue Opens On | February 21, 2013 | |
| Issue Closes On | March 15, 2013 | |
| Listed On | BSE and NSE | |
| Tax Rate (%) | Effective Yield (Post Tax) | |
| 10.3 | 8.39 | 8.57 |
| 20.6 | 9.48 | 9.69 |
| 30.9 | 10.9 | 11.13 |
The company, this time, has come up with a lower coupon rate as compared to its previous issue (Tranche 1). The first option (with a 10-year tenure), now offers a coupon of 7.53 per cent which is lower by 31 basis points against its previous Tranche. Similarly, the second option coupon rate is lower by 32 basis points to 7.69 per cent as compared to its Tranche 1 issue. This is majorly after the interest rates have softened, as the Reserve Bank of India (RBI) slashed the key repo rate by 25 basis points in its January 2013 month monetary meet.
We believe that HUDCO is offering better coupon rates (approximately higher by 15 basis points) as compared to the current on-going PFC issue. And hence it has an edge over the PFC tax-free bonds. The issue is looking very attractive especially in case of individuals who are fall in the higher tax brackets and are willing to invest for a longer horizon.
Nevertheless, we suppose that the issue has just opened and would be closing on March 15, which is quite some time, and during this period we expect a couple of more firms to tap the market with similar issues. One needs to therefore check out their coupon rates and then go with the company which is offering the best rates. We would be updating investors on the same and would hence request you to kindly visit our website regularly.
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