With a view to attracting long-term investments into the infrastructure space, infrastructure finance companies have started raising funds through tax-saving bonds.
The latest to enter the fray is L&T Infrastructure Finance Company. While Power Finance Corporation tapped the market in October, IDFC's issue opened for subscription recently.
Addressing presspersons here on Monday after launching the bond issue for raising Rs. 1,100 crore, N. Sivaraman, Director, L&T Infrastructure Finance Company (LTIF), said investors used to look at subscribing to such bonds which offered an additional tax deduction of Rs. 20,000 under Sec. 80CCF of the Income-tax Act.
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For investors in the highest tax bracket of 30.9 per cent, subscribing to these bonds would result in a tax saving of Rs. 6,180, taking into account the nine per cent interest rate offered on these bonds. For investors in tax brackets of 20.6 per cent and 10.3 per cent, the tax savings would be Rs. 4,120 and Rs. 2,060, respectively.
The bonds have two options — 9 per cent interest payable annually and 9 per cent compounded annually but payable at the end of maturity or buyback. The bonds come with a 10-year tenor and have a lock-in period of five years. Once the lock-in period is over, the bonds will be tradable on the stock exchanges.
The face value of each bond is Rs. 1,000 and the minimum subscription is Rs, 5,000 for five bonds. The issue is open till December 24.
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Investors have the option to go for a buy-back (where the company will buy back the bonds) at the end of five and seven years.
According to Suneet Maheshwari, Chief Executive Officer, LTIF had a total lending portfolio of Rs. 8,790 crore, registering a year-on-year growth of 67 per cent. Around 63 per cent of the company's lending portfolio was in the form of loans to corporates in the infrastructure segment. The balance went directly to projects, he said. The exposure to the power sector was Rs. 3,900 crore, he added.