IIFCL: Long-Term Infrastructure Bonds

India Infrastructure Finance Company Ltd (IIFCL)

 Company profile

IIFCL is a wholly-owned Government company providing financial assistance to long-term infrastructure projects. As on 30 Sept 2010; 105 of the 124 projects for which IIFCL has sanctioned finances. As on March 31, 2010 and September 30, 2010, it had no non-performing advances. The GoI has identified infrastructure development as a key priority and the Eleventh 5 Year Plan (FY 2008-2012) and envisage investments of US$ 514 bn. in the Indian infrastructure sector. Thus, IIFCL is expected to play a prominent role in the infrastructure finance space in India going forward.

Salient features of the bond issue (Tranche I)

First Bond Issue by a Government of India enterprise with tax benefits under Sec 80CCF of the Income Tax Act, 1961.

Credit rating agency CRISIL has rated the Bonds under this offer as “AAA/Stable” and CARE has rated the bonds “CARE AAA” with stable outlook, indicating highest safety.

These bonds will be issued only to Resident Indian Individuals (Major) and HUF.

Available in 4 Series with diverse maturity; Series I & II having maturity of 10 years and Series III & IV having maturity of 15 years.

The bonds are fully secured with first charge over receivables of the Company. The security cover is 1.0 times of the outstanding Bonds at any point in time.

The Bonds bear an attractive combination of coupon rate 8.15% p.a. (Series I and II) and 8.30% p.a. (Series III and IV).

All the 4 Bond Series provide buyback option to investors.

Bonds can be held in DEMAT form or physical form as per investor preference. The bonds will be listed on BSE and can be traded post 5 year lock – in period.

As per the current provisions of the I.T. Act, for bonds held in DEMAT form; no TDS will be deducted on interest on Bonds. If bonds are held in physical form, no tax may be withheld if such interest does not exceed Rs 2,500 in a financial year. However, such interest is taxable income in the hands of Bondholders.

Investors can mortgage or pledge these bonds to avail loans after the lock-in period.

Under Section 80 CCF of the I.T. Act, an investor in such infrastructure bonds will be entitled to tax deduction of investments of up to Rs 20,000 over and above the Rs 1,00,000 deduction available under section 80C, 80CCC & 80CCD read with section 80CCE.

Issue summary

Issue opens: 04th February 2011

Issue closes: 04th March 2011 (Issue is extended and will be closing on 16th March, 2011)

Issue Structure:

Maturity: The Bonds with a maturity of 10 years will be issued in Series I and II whereas Series III and IV will have a maturity of 15 years each.

Face Value: Each Bond has face value of Rs 5,000 each.

Minimum application: Rs 10,000 or 2 bonds. The bonds can be of the same series or 2 bonds across different series.

Lock in: 5 years from the date of allotment.

Buyback facility: Available for all the Bond Series.

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