Bangalore: Larsen and Toubro (L&T) Infrastructure Finance Company and Infrastructure Development Finance Company (IDFC) are issuing their 2nd tranche of long-term infrastructure and tax-saving bonds, reports Prasanna Deshpande of MyDigitalFC.

L&T and IDFC are targeting people of retail sector and salaried class for their infrastructure bonds. These bonds will be issued from January 10 to February 11 which can be traded in the Bombay Stock Exchange. Through these infra bonds, IDFC is seeking to generate about 4,500 crore, whereas L&T is aiming to raise 300 crore. Both companies are providing an interest rate of about 8.7 percent on their infra bonds. L&T is also targeting for an over-subscription of 1,100 crore. The lead managers of these infra bonds are JM Financial Consultants, ICICI Securities and Karvy Investor Services.

Y.M. Deosthalee, MD and Chairman of L&T Finance Holdings said, “Compared with the first tranche, rate of interest rate is slightly lower in the second tranche, which is an indication that interest rates are peaking out.” L&T had generated about 530 crore in its 1st tranche. An IDFC personnel said, “IDFC is likely to announce its tax-savings, long-term infrastructure bonds in the next few days and rate of interest will be similar to what L&T Infra bonds are offering.”  IDFC had collected about 500 crore in its 1st tranche, at 9 percent interest. 

According to Deosthalee, money generated through these bonds will be utilized for funding infrastructure projects as infrastructure is a budding sector and has a prosperous future ahead. Suneet K. Maheshwari, Chief Executive at L&T Infrastructure Finance, says, “Despite a slightly lower interest rate offering, yields look very good and would range around 11-18 percent over 10 year period.”

These bonds are available at 3 redemption options – an exit period of 5, 7 and 10 years. Investors can select one or more redemption options according to their needs and convenience. Section 80CCF of the Income Tax (IT) Act provides exemption from tax on investments made in these bonds up to 20,000 a year. Investments made above 20,000 a year will fall under the tax bracket, that is, investment of 20,000 is tax free but the remaining amount is taxable.