NHPC's tax-free bonds over-subscribed

Updated: Saturday, October 19, 2013, 14:02 [IST]

The subscription for state hydro-power generator NHPC's tax-free bond that opened on October 18, 2013 got an overwhelming response on the first day. As reported by a Senior company Executive in one of the media reports, the bonds were subscribed to the extent of over two times. The issue that aimed to raise Rs. 1000 crore with 40% of the issue for the retail investor segment is reported to have mopped up a sum of Rs. 1,615 crore.

With a coupon rate of 8.43% 8.79% and 8.92% for 10, 15 and 20 years respectively for retail investors, the issue has raised Rs. 172 crores from the segment. NHPC tax-free bond offering a coupon rate of 8.67%, 8.54% and 8.18% for 10, 15 and 20 years for
corporates, qualified institutional buyers (QIBs) and high net worth individuals (HNIs) garnered an investment of Rs 420 crore from QIB and Rs. 140 crore from HNIs.

Even upon garnering this sum, one of the senior company executive was quoted in The Economic Times report saying "We will not close the issue unless we get 40% of the total issue size from retail investors''. The issue is to close on November 11. However, as reported by the senior company official, the issue shall be closed before the subscription when the threshold limit set at Rs. 400 crore for retail investors is reached.

Other tax-free bonds running currently in the market are the PFC and IIFCL's tax-free bonds. However with security and guaranteed returns together with a couple of other benefits, NHPC tax-free bond is suitable for investors looking for tax-free income on an annual basis and are ready to part away with funds for a considerable span of time due to higher maturity period. With tax-free and risk-free principal and interest amount, the bonds can be subscribed by retired individuals.

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