IIFCL to raise up to Rs 2,500 crore from tax free bonds

India Infrastructure Finance Company Ltd (IIFCL) on Friday proposed to raise up to Rs 2,500 crore through public issue of tax free bonds.

The first tranche of tax free bonds of Rs 500 crore, with an option to retain over-subscription up to Rs 2,000 crore aggregating to Rs 2,500 crore, was launched on first-come, first-serve basis on a week ago, IIFCL executive director Karsh Kumar Bhanwala said on Friday.

The state-owned company had received bids aggregating to Rs 714.37 crore towards the first tranche of bond issue till Thursday, he added.

The proceeds from the issue would be utilised by IIFCL for financing activities, including lending and investments.

Besides, the fund would be used to meet working capital requirements, he said, adding that the public issue closes on October 31.

The coupon rates of these tax free bonds for retail investors are 8.26 per cent for 10-year bond, 8.63 per cent for 15-year paper and 8.75 per cent for 20-year bond.

The government authorised IIFCL to issue tax free bonds aggregating up to Rs 10,000 crore during the current fiscal year (FY14) out of which the company has already raised Rs 2,963.20 crore through private placement.

In February, the government had allowed some financial institutions to mop up about Rs 50,000 crore from tax-free bonds in 2013-14 in a bid to encourage investment in the infrastructure sector.

IIFCL, wholly-owned by the government, provides long-term financial funding to infrastructure projects like power, roads and highways, ports, airports through direct lending, subordinate debt, refinance and credit enhancement.

The company has disbursed loans more than Rs 26,000 crore as of March 31, 2013.