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IIFCL Tax Free Bonds - Issue opening on 26 Dec 2012‏

Discussion in 'Mutual funds and Exchange Traded Funds' started by real_buzz, Dec 25, 2012.

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    IIFCL Tax Free Bonds - Issue opening on 26 Dec 2012‏



    Issue Period: December 26, 2012 - January 11, 2013
    HIGHLIGHTS OF TAX BENEFITS

    Interest from these Bonds do not form part of total income as per provisions of Section 10 (15) (iv) (h) of Income Tax Act, 1961 read along with Section 14A (1) of the IT Act.
    There shall be no deduction of tax at source from the interest payable on the Bonds.
    Wealth Tax is not levied on investment in bonds under section 2(ea) of the Wealth-tax Act, 1957

    In pursuance of Section 2 (29A) of the IT Act, read with section 2 (42A) of the IT Act, the Bonds since be listed on BSE, shall be treated as a long term capital asset if the same is held for more than 12 months immediately preceding the date of transfer. Under section 112 of the Income
    Tax Act, 1961, capital gains arising on the transfer of long term capital assets being listed securities are subject to tax at the rate of 20% of capital gains calculated after reducing indexed cost of acquisition or 10% of capital gains without indexation of the cost of acquisition.

    COMPANY PROFILE
    A wholly-owned Government of India undertaking incorporated under the Companies Act in January 2006.

    Commenced operations in April 2006 and notified as a Public Financial Institution in January 2009.
    Provides financial assistance to long-term infrastructure projects in diversified sectors such as roads, bridges, railways, seaports, airports, inland waterways, other transportation projects, power, urban transport, water supply, sewage, solid waste management and other physical infrastructure in urban areas, gas pipelines, infrastructure projects in special economic zones, international convention centres and other tourism related infrastructure projects, cold storage chains, warehouses, and fertilizer manufacturing industry.

    Provides refinance for loans sanctioned by banks and other eligible institutions, in accordance with the eligibility criteria set out in the Refinance Scheme.
    Has three wholly owned subsidiaries, India Infrastructure Finance Company (UK) Limited, IIFCL Projects Limited and IIFCL Asset Management Company Limited.
    Contributor along with IDFC and Citigroup Inc., in the India Infrastructure Fund constituted in 2007, to facilitate large scale capital investments in infrastructure assets in India through a combination of long term debt and equity capital raised in several tranches. The India Infrastructure Fund is registered with SEBI as a domestic venture capital fund.

    The cumulative gross loans sanctioned by IIFCL, under direct lending as on September 30, 2012, on an unconsolidated basis, aggregated to Rs. 49,603.31 Crores in 282 projects with total project cost of Rs. 4,50,547.90 Crores and the total disbursement of Rs. 23,702.03 Crores.
    Debt-equity ratio stood at 5.15:1 as at September 30, 2012, on an unconsolidated basis.

    SALIENT FEATURES OF THE PROPOSED TAX FREE BONDS
    Tax benefits u/s 10 (15) (iv) (h) of the Income Tax Act, 1961
    Interest from these Bonds shall not form part of total income of any person/ assessee
    Credit Rating of “[ICRA] AAA (Stable)” by ICRA; “BWR AAA (Stable)” by BRICKWORK and “CARE AAA” by CARE

    Bonds can be held in physical or in dematerialized form, at the option of bondholders but the trading of the Bonds shall be in dematerialized form only
    Bonds are proposed to be listed on the BSE

    Strengths
    Strong GoI support and relationships with government entities: IIFCL is a wholly owned government company and controlled by GoI. The company’s ownership and position as a policy based institution for promotion of infrastructure development have helped in shaping the contours of infrastructure financing in the country.

    Well-developed relationships with banks and financial institutions: The company maintains well-developed relationships with multilateral and bilateral financing institutions, domestic financing institutions as well as scheduled commercial banks. These relationships enable the company to encourage an increased flow of long-term capital, including foreign capital into infrastructure projects in India and also enable them to play a key role in developing and introducing innovative financial products and structures to allow a broader cross-section of lenders and investors to participate in infrastructure financing in India.
    Financial strength: The company’s CAGR over the last three Fiscals of the unconsolidated profit after interest before tax and profit after tax stood at 78.38% and 79.88%, respectively. As at September 30, 2012, Fiscal 2012, 2011 and 2010, the cumulative gross loans sanctioned under direct lending, on an unconsolidated basis, were Rs. 49603.31 Crores, Rs. 40373.00 Crores, Rs. 31778.00 Crores and Rs 24375.00 Crores respectively.

    Strong asset quality and robust credit and risk management policies: IIFCL’s disciplined credit and risk management policies have enabled it to achieve a strong asset quality over the years. As at March 31, 20 12, the Company had nil non-performing advances and as at September 30, 2012, we had non-performing assets aggregating to Rs. 13.65 Crores.

    Experienced management team and professional staff: IIFCL’s management team and professional staff have expertise in various areas such as project finance, financial markets and advisory services, as well as domain knowledge and experience in the various sectors to which it provides financing. This contributes to understand and & effectively manage its business.

    ISSUE STRUCTURE
    Issuer India Infrastructure Finance Company Limited

    Issue of Bonds Public issue of the tax free bonds in the nature of secured redeemable non-convertible bonds of the Company of face value of Rs 1,000 each, having benefits under section 10(15) (iv) (h) of the Income Tax Act, proposed to be issued by the Company pursuant to the relevant Tranche Prospectus, for an amount up to Rs. 9,215 Crores * The Bonds will be issued in one or more tranches subject to the Shelf Limit.
    This Tranche - I Issue by the Issuer is of Bonds aggregating to Rs. 1,500 Crores with an option to retain oversubscription up to the Shelf Limit (i.e., up to Rs. 9,215 Crores*) and is being offered by way of the Prospectus Tranche – I containing, inter alia, the terms and conditions of Tranche – I Issue, which should be read together with the Shelf Prospectus dated December 10, 2012 filed with the RoC, the Designated Stock

    Exchange and SEBI.
    *In terms of the Notification, the Company has raised Rs 785 Crores on a private placement basis in two tranches, through Disclosure Document dated November 9, 2012 and November 16, 2012. There is no change in the Shelf Limit mentioned in the Draft Shelf Prospectus dated November 30, 2012 i.e., Rs. 9,215 Crores. This Limit shall be applicable for raising further funds through public issue route and/or the private placement route, such that the aggregate amount raised through private placement route shall not exceed ` 2,500 Crores i.e., up to 25% of the allocated limit for raising funds through Tax Free Bonds during Fiscal 2013, in terms of the Notification.

    Mode of Issue Public Issue -- Base Issue Size Rs 1,500 Crores with an option to retain over subscription up to the Shelf Limit (i.e., up to Rs 9,215 Crores*)

    Security First pari passu charge on receivables of the Company with an asset cover of one time of the total outstanding face value amount of Bonds, pursuant to the terms of the Bond Trust Agreement. The Issue proceeds will be kept in separate Escrow Account(s) and the Company will have recourse to such funds only after creation of Security for the Bonds.
    Listing The Bonds are proposed to be listed on BSE. The Designated Stock Exchange for the Issue is BSE.

    Credit Ratings “[ICRA] AAA (Stable)” by ICRA ; “BWR AAA (Stable)” by BRICKWORK and “CARE AAA” by CARE
    Issuance** In dematerialized form as well as in physical form, at the option of the Applicant
    Trading** In dematerialized form only

    Lead Managers to the Issue-- A.K. Capital Services Limited ,SBI Capital Markets Limited , Enam Securities Private Limited, ICICI Securities Limited and Kotak Mahindra Capital Company Limited.

    Interest on application monies received which are used towards allotment of Bonds
    At the respective coupon rate of 7.19% p.a.,7.36%p.a. & 7.40%p.a. on Tranche - I Series 1, Tranche - I Series 2 and Tranche - I Series 3, respectively, for Allottees under Category I, II and III Portions and at the rate of 7.69% p.a., 7.86% p.a. and 7.90% p.a. on Tranche - I Series 1, Tranche - I Series 2 and Tranche - I Series 3 for Allottees under Category IV Portion (except ASBA Applicants), subject to deduction of tax at source, as applicable

    Interest on refund money -- At the rate of 5% per annum. (except ASBA Applicants), subject to deduction of tax at source, as applicable
    Issue Price-- Rs. 1,000 per Bond

    Put/Call Option There is no put/call option for the Bonds.
    Minimum Application 5 Bonds (Rs 5,000) & in multiples of 1 Bond (Rs 1,000) thereafter (for all Series of Bonds, either taken individually or collectively)

    Deemed Date of Allotment The Deemed Date of Allotment will be the date on which the Board of Directors has approved the Allotment of Bonds for each Tranche Issue or any such date as may be determined by the Board of Directors. All benefits under the Bonds including payment of coupon rate (as specified in the Prospectus Tranche - I) will accrue to the Bondholders from the Deemed Date of Allotment. Actual Allotment may occur on a date other than the Deemed Date of Allotment.
    Depositories NSDL and CDSL
    Trustee IL&FS Trust Company Limited
    **In terms of Regulation 4(2) (d) of the Debt Regulations, the Company will make public issue

    Type Of Issue

    Tranche-I Series 1

    Tenor -- 10 years

    Maturity / Redemption Date -- 10 years from the Deemed Date of Allotment

    Redemption Amount (Rs./ Bond) -- Repayment of the Face Value plus any interest that may have accrued at the Redemption Date

    Frequency of interest payment – Annual

    Minimum application size -- 5 Bonds (Rs 5,000) & in multiples of 1 Bond (Rs 1,000) thereafter (for all Series of Bonds, either taken individually or collectively).

    Face value (Rs./ Bond) -- Rs. 1000

    Issue price (Rs./ Bond) -- Rs. 1000

    Coupon rate (%) p.a. for

    Category I,II,III and IV—7.19 %

    Additional Coupon Rate (%) for Category IV** -- Additional coupon rate of 0.50% to be paid to original Allottees under Category IV Portion.

    Annualized yield (%) for Category I,II and III – 7.19 %

    Annualized Yield (%) for Category IV** -- 7.69 %

    Put option and call option – None

    Tranche-I Series 2

    Tenor -- 15 years

    Maturity / Redemption Date -- 15 years from the Deemed Date of Allotment

    Redemption Amount (Rs./ Bond) -- Repayment of the Face Value plus any interest that may have accrued at the Redemption Date

    Frequency of interest payment – Annual

    Minimum application size -- 5 Bonds (Rs 5,000) & in multiples of 1 Bond (Rs 1,000) thereafter (for all Series of Bonds, either taken individually or collectively).

    Face value (Rs./ Bond) -- Rs. 1000

    Issue price (Rs./ Bond) -- Rs. 1000

    Coupon rate (%) p.a. for

    Category I,II,III and IV—7.36 %

    Additional Coupon Rate (%) for Category IV** -- Additional coupon rate of 0.50% to be paid to original Allottees under Category IV Portion.

    Annualized yield (%) for Category I,II and III – 7.36 %

    Annualized Yield (%) for Category IV** -- 7.86 %

    Put option and call option -- None

    Tranche-I Series 3

    Tenor -- 20 years

    Maturity / Redemption Date -- 20 years from the Deemed Date of Allotment

    Redemption Amount (Rs./ Bond) -- Repayment of the Face Value plus any interest that may have accrued at the Redemption Date

    Frequency of interest payment – Annual

    Minimum application size -- 5 Bonds (Rs 5,000) & in multiples of 1 Bond (Rs 1,000) thereafter (for all Series of Bonds, either taken individually or collectively).

    Face value (Rs./ Bond) -- Rs. 1000

    Issue price (Rs./ Bond) -- Rs. 1000

    Coupon rate (%) p.a. for

    Category I,II,III and IV—7.40 %

    Additional Coupon Rate (%) for Category IV** -- Additional coupon rate of 0.50% to be paid to original Allottees under Category IV Portion.

    Annualized yield (%) for Category I,II and III – 7.40 %

    Annualized Yield (%) for Category IV** -- 7.90 %

    Put option and call option -- None

    *The Company shall Allot Tranche I Series 3, to all valid applications, wherein the Applicants have not indicated their choice of the relevant Series.

    ** In case the Bonds held by the original Allottees under Category IV Portion are sold/transferred (except in case of transfer of Bonds to legal heirs in the event of

    death of the original Allottee), the coupon rate shall stand revised to the coupon rate applicable for Allottees falling under Category I, II and III Portions.

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