HUDCO Launches Tax Free Infrastructure Bonds

27 Jan

HUDCO (Housing and Urban Development Corporation), next in pipeline after Indian Railway Finance Corp. launching its tax free bond. To elucidate further, tax free means, the interest received from these bonds will not be taxed. They are very much different from 80CCF infrastructure bonds, as the investments in this bonds will make your taxable income reduce by that amount you have invested (maximum Rs.20, 000), but the interest earned is taxable here.

The issue opens on 27 Jan, 2012 and closes on 06 Feb, 2012. The bond is available with a face value of Rs. 1000 and the bond size is of Rs. 4,684.72 crores. Minimum investment which has to be made is of Rs. 10,000 and further in multiples of Rs.1, 000 thereafter. The bond will be listed on both NSE and BSE. They have been rated by Fitch as Fitch AA+ and CARE AA+ by CARE. The allotment will be on first come first serve basis as, the issue is expected to over –subscribe.

The issue have reserved 30% for retail investors, 25% for HNIs and 45% for QIPs. The issue is available with two different investment options, one with 10 years and other with 15 years of maturity period. Well the issue offers different interest rates for both retail investors and other category of investors. Individuals and NRIs investing less than Rs. 5 lakhs will be categorized as retail investors. NRI can apply in either of the category. The issue is available with a step-down feature, which means the benefit of higher interest rate which will be availed by retail investor will not be forwarded to the buyer of the bond in the secondary market. The buyer of the bond in the stock exchange will be getting interest rate applicable for other categories, i:e, HNIs and QIPs.

Details of the issue

Issue opening date	27 Jan, 2012
Issue closing date	06 Feb, 2012
Face value	Rs. 1,000
Minimum investment	Rs.10,000 & further in multiples of Rs. 1,000
Credit rating	Fitch AA+ by Fitch and CARE AA+ by CARE
Listing	NSE & BSE
Reservation	30%(retail investors), 25%(HNIs), 45%(QIPs)
Series	I	II
Tenure	10 years	15 years
Interest rate	8.22%(retail investors) 8.10%(other investors)	8.35%(retail investors) 8.20%(other investors)
Interest payment	Annual	Annual

Considering any option offering interest rate above 8% is a good option to invest in. Further for investors looking for options other than fixed deposits can pick such tax free issues as, they are more lucrative in comparison to bank FD’s.