The Indian Railway Finance Corporation (IRFC) on Friday said it is extending the closing date for its public issue of tax-free bonds to March 14. IRFC is seeking to raise Rs 2,916.87 crore through the issue, which was supposed to close on Friday. “We wanted the entire issue to be subscribed; hence, we have extended the date of closing,” said DC Arya, director of finance, IRFC.
Arya said investor demand was diverted to National Housing Bank’s (NHB) second tranche of tax-free bonds, which offers a higher coupon rate. NHB’s public issue of tax-free bonds worth Rs 1,000 crore offers a maximum coupon rate of 8.93% for a tenure of 15 years, while IRFC’s bond issue offers a maximum coupon rate 8.88% for a 15-year tenure. At the end of Friday’s close, NHB’s public issue had received bids worth R1,251 crore while IRFC’s issue got bids worth Rs 774.65 crore.
Rural Electrification Corporation (REC), National Thermal Power Corporation (NTPC) and NHB were, earlier in the month, allowed to increase the shelf limits on their tax-free bond issues. While REC and NHB came out with a second public issue of tax-free bonds worth Rs 1,000 crore each, NTPC raised Rs 500 crore via private placement.
In 2013-14, tax-free bonds saw a much better performance than the tepid demand seen last year as interest rates being offered are higher. This is partly because government bonds have risen sharply during the course of the year. The 10-year benchmark yield closed at 8.813% as on Friday.
Investors are also looking at tax-free bonds as an attractive long-term investment as there were media reports that suggested that they would be discontinued by the government. Finance minister P. Chidambaram did not allot tax-free bonds for state-owned companies in his interim budget speech earlier this month.