State-run Power Finance Corp (PFC) plans to raise Rs 100 crore through tax free bonds issue that begins on Monday (today).
The proposed issue is part of its plan to garner Rs 5,000 crore by way of issuing tax-free securities in the current fiscal (2012-13). Out of the total target, Rs 1,110 crore has already been raised. “PFC to raise Rs 100 crore through this issue with an option to retain over-subscription up to the Residual Shelf Limit (Rs 3,890.25 crore) prior to March 31, 2013,” according to Sebi data. The issue starts on 18th February, 2013 and close on March 15, 2013.
Tranche- II Series 1
Tranche- II Series 2
|Tenor||10 years||15 years|
|Coupon Rate for Retail Investors||
The differential rate for Retail Investors shall be applicable only to the original allottee.
The interest earned will be exempt from tax under section 10 (15)(iv)(h) of the Income Tax Act, 1961.
Other Important Points
- Minimum application for subscription in retail segment is of Rs 5,000
- Maximum investment limit for retail investors is Rs 10 lakhs
- Investors can choose to apply in demat as well as physical form. Demat account is not mandatory
- NRI Investment: Non-US NRIs can also invest in this issue. They can apply for these bonds both on repatriation basis as well as non-repatriation basis.
- The allotment will be made on a “first-come-first-served” basis.
- Interest from these Bonds shall not be included in total income of any person as per provisions of Section 10 (15) (iv) (h) of Income Tax Act, 1961.
- Since the interest income on these Bonds is exempt from tax, no Tax Deduction at Source is required.
- Wealth Tax is not levied on investment in bonds under section 2(ea) of the Wealth-tax Act, 1957
- The Bonds being listed with BSE shall be treated as a long term capital asset if they are held for more than 12 months and therefore capital gains arising on the transfer of Bonds shall be subject to tax at the rate of 20% of capital gains calculated after reducing indexed cost of acquisition or 10% of capital gains without indexation of the cost of acquisition.
Few things about bond
- The bond is rated ‘[ICRA] AAA’ by ICRA, ‘CRISIL AAA /Stable’ by CRISIL and ‘CARE AAA’ by CARE, and will be listed on BSE.
- The funds would be utilized towards lending purposes, debt servicing and working capital requirements.
- ICICI Securities Ltd, AK Capital Services Ltd, Axis Capital, Kotak Mahindra Capital Company Ltd, SBI Capital Markets Ltd are acting as lead managers to the issue.
- PFC posted a net profit of Rs 1,117 crore for the third quarter of this fiscal, against Rs 1,108 crore in the same period of previous fiscal.
- Company’s total income from operations rose to Rs 4,465.37 crore for three months ended December 31, 2012 from Rs 3,282.35 crore in the same period last fiscal.
Should You Invest?
- On a pre-tax basis, the yield comes to about 10.77% which is quite good in current interest rate scenario. ( for those who are in 30% tax slab having invested in 15 years scheme)
- Since interest rates are going down, subsequent tax-free bond issues could be at lower rates.
How to Invest
You can invest via downloading form from company’s website @ PFC India.