Public issue of IRFC’s tax-free bonds next week

Indian Railway Finance Corporation—the finance arm of Indian Railways—is set to come out with its public issue of tax-free bonds next week.

Bond arrangers said the coupon rates stand at 7.07%, 7.28% and 7.25% on its 10, 15 and 20-year tax-free bonds, respectively, for categories that include institutionals, corporates and HNIs.

For retail individual investors, the coupon rates are at 7.32%, 7.53% and 7.50% on 10,15 and 20 year bonds respectively, arrangers said adding that the issue is set to open on December 8 and close on December 21.

Yields on tax-free bonds are at least 100-125 bps lower than those on regular bonds issued by the same companies, according to bond market participants.

IRFC plans to raise up to R4,532 crore through the public issue route out of a total quota of R6,000 crore it has been allotted this fiscal.

Public issue of tax-free bonds had seen a good response this year after being absent from the markets in the previous fiscal.

Earlier, Power Finance Corporation (PFC), NTPC and Rural Electrification Corporation (REC) had come out with their public issue of tax-free bonds and all three companies raised R700 crore each through this route with considerable response from investors.

REC’s public issue even witnessed a coupon below 7% on its 10-year tax-free paper for categories that included institutionals, corporates and HNIs.