HUDCO Tax Free Bonds: Another tax free bond closer to the 9% coupon rate

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HUDCO Tax Free Bonds: Another tax free bond closer to the 9% coupon rate
It's a deluge of tax free bonds out there with the likes of Encore Port, IRFC , REC and NHB. Most are offering a similar coupon rate, though, at the moment the coupon rate from Ennore Port at 9 per cent per annum is by far the most attractive.

HUDCO's third tranche of tax free bonds are currently open for subscription. The government owned entity plans to raise Rs 286 crores through the bond offer. Read what are tax free bonds here

Coupon rates

For Qualified Institutional Buyers ( QIBs), Corporates and High Networth Individuals ( HNIs) applying for bonds more than Rs 10 lakh, HUDCO bonds would offer a coupon rate of 8.29 per cent per annum for 10 years, 8.73 per cent for 15 years and 8.71 per cent for 20 years.

On the other hand for retail individual investors applying for bonds up to Rs 10 lakh, the coupon rate has been pegged at 8.54 per cent for 10 years, 8.98 per cent for 15 Years and 8.96 per cent for 20 years.

The coupon rates are more or less in line with recent offerings and marginally lower than the 9 per cent offered by Ennore Port for its 20 year offering for retail investors.  Read more on Ennore Bonds here

The bonds are highly rated by credit rating agencies. Normally, in bonds that span a long time frame there is always an element of risk in timely payment of interest and principal. However, investors need no be unduly worried since HUDCO is a government owned entity.

One can subscribe to the offer, if one is in the 20 and 30 per cent tax bracket. It's important to note that if you wish to sell the bonds without holding them until maturity it is better to apply for small quantities since liquidity of tax free bonds is low and you may not be able to sell large quantities, through the exchange, where these bonds are listed.

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