State-run power sector lender Rural Electrification Corporation (REC) today said its public issue of tax-free bonds aimed at raising up to Rs 4,500 crore will open for subscription on December 3.
The issue will close on December 10.
"Our target is to raise Rs 4,500 crore from public. It would be first tax-free bond this fiscal in which upper investment limit for retail investors has been hiked up to Rs 10 lakh from Rs 5 lakh earlier," REC Director (Finance) Ajeet Agarwal told reporters here.
"The proceeds shall be utilised for normal lending operations of REC in the power sector and infrastructure projects to augment resource base of the company," he said.
Retail investors will get 50 basis points higher return compared to other categories like QIB, HNI and corporates, Agarwal said.
The secured redeemable non-convertible bonds of Rs 1,000 each will be offered in two series - with coupon rate of 7.72 per cent and 7.88 per cent in series-I (10 years) and series-II (15 years), respectively, to retail investors.
The minimum application for subscription in retail segment is of Rs 5,000 with an upper limit of Rs 10 lakh, he said, ading "40 per cent of the issue is reserved for retail participation."
The company, which has the government mandate to raise Rs 5,000 crore through tax-free bonds, netted Rs 500 crore through private placement on November 21.
"REC's average cost of borrowing is around 8.15 per cent, while the effective yield on loans averages out to be 11.69 per cent," Agarwal said.
REC's networth at end of September 30, 2012 stood at Rs 16,576 crore. The company reported a profit of Rs 1,800 crore in first six months of the current fiscal.
The company's net interest margin for first six months in this fiscal stood at 2.32 per cent. Net NPA was at 0.38 per cent at the end of September 30.
The Navratna PSU's loan outstanding as on March 31, 2012 stood at 1.01 lakh crore. The Government of India's stakeholding in REC is 66.8 per cent, while public share is 33.2 per cent.
REC sanctioned projects to the tune of Rs 50,000 crore, and disbursed Rs 20,000 crore in the first nine months of 2012-13, Agarwal said.
"Our target is to achieve the balance Rs 30,000 crore disbursements by this fiscal-end."
Last year the company, which mainly provides loans for various power projects, had raised Rs 3,000 crore through its first issue of tax-free bonds.
According to REC, total installed power capacity in the country was 2,09,276 MW as on March 31, 2012. Of this, 88,881 MW was in the state sector, 62,000 MW in central and nearly 60,000 MW in the private sector.
The public finance institution estimates its loan book to grow by 20-25 per cent in FY13 over the last fiscal. The company has targeted a disbursement growth of 15-20 per cent in the current fiscal.