The salient features of these tax-free bonds would be as under:
1. Term : 10, 15 and/or 20 years
2. 40% of the issue shall be earmarked for Retail Individual Investors (i.e. individuals, HUFs and NRIs investing less than Rs.10 lakhs)
3. PAN No. : Mandatory
4. Interest Rate : There will be a ceiling on the interest rates based on the reference Govt. securities rate prevailing around the time of the issue.
- For AAA rated borrowers the limit would be 0.55% less than the reference G.Sec rate for retail investors (For others the limit fixed is 0.80% less than the reference G.Sec rate)
- AA+ rated borrowers can offer 0.1% more than the limit for AAA rated borrowers
- AA or AA- rated borrowers can offer 0.2% more than the limit for AAA rated borrowers
The higher rate for retail investors will not be available in case bonds are transferred to non-retail investors.
Also, the above rates are for annual payments. For semi-annual payments, the rates would be 0.15% lower.
5. Following companies have been permitted to issue the aforesaid tax-free bonds:
- IIFCL and IRFC - Rs.10,000 crores each
- HUDCO, REC, NHAI and PFC - Rs.5,000 crores each
- NHB - Rs.3,000 crores
- NTPC - Rs.1,750 crores
- NHPC - Rs.1,000 crores
- IREDA - Rs.1,000 crores
- Ennore Port - Rs.500 crores
- Airport Authority of India - Rs.500 crores
- Cochin Shipyard - Rs.250 crores
Based on the above-mentioned guidelines, these companies will now plan out the issue of their tax-free bonds over the next around seven months remaining in this Financial Year.
Depending on the rates offered, one would have to take a view whether these bonds are worth investing or not. Of course, due to relatively low liquidity, one should be prepared to stay invested till maturity.