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REC Tax free bonds

Discussion in 'IPO' started by sunil, Dec 4, 2012.

  1. sunil Member

    We are pleased to present you the details of Tax-Free Bonds issued by Rural Electrification Corporation (REC). The interest earned on these bonds is fully exempt from tax and there will be no deduction of tax at source from the interest, irrespective of the amount or the investors’ status. The bonds have been rated AAA by CRISIL, CARE & ICRA and carries an attractive tax-free coupon of 7.88% p.a. (for 15 years tenor applicable only to retail applicants investing upto Rs.10 lakh) The pre-tax yield works out to 11.40% p.a. (for individual investors in the highest tax bracket).


    Bond Details:


    Bond Structure --Tax Free, Secured, Redeemable, Non-Convertible Bond


    Tax Free Coupon

    HNI & Corporates: 7.22% (10 Yr); 7.38% (15 Yr)

    *Retail Investors: 7.72% (10 Yr); 7.88% (15 Yr)

    Rating -- “AAA” by CRISIL, CARE & ICRA

    Face Value (per bond)-- Rs.1000

    Minimum Application-- Rs.5,000

    Listing-- Proposed to be listed on BSE & NSE

    Issue Opens On-- December 03, 2012

    Issue Closes On--December 10, 2012

    *Retail Investors mean Resident Indian Individuals/HUFs applying for bonds upto Rs. 10 Lakhs per PAN Card

    Company Profile:
    Rural Electrification Corporation Limited (REC), a Navratna Central Public Sector Enterprise under Ministry of Power, was incorporated on July 25, 1969 under the Companies Act 1956. REC a listed Public Sector Enterprise of Government of India had a net worth of Rs. 12,789 Crore as on 31.03.11. Its main objective is to finance and promote rural electrification projects all over the country. It provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them


    Bond USP:
    Secured PSU Bonds
    Listing on BSE & NSE
    Higher accruals over longer tenures
    Strong Credit Rating
    Attractive Tax-Free Coupon
    High Pre-Tax Yield

    Our Views:
    The issue looks attractive for retail applicants (investing below Rs.10 lakh per PAN Card) on account of the additional 0.50% interest offered. A pre-tax yield of 11.40% on a AAA rated bond is very good considering the current interest rate scenario and the outlook on the same. By locking in money at higher yields for a longer tenure, investors are protected from subsequent fall in interest rates. Please note that the 0.50% additional interest is applicable only to retail investors applying in the primary issue.

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