NHAI Tax-Free Bonds December 2015 Issue Review
In the last 2 months we have seen couples of tax-free bonds and all were fared pretty awesome. Be it NTPC, PFC, REC or IRFC all of them got oversubscribed on the opening day only, however, former 3 tax-free bonds issue size was around Rs.700 crore while the last one IRFC was over Rs.4,000 crore which also got oversubscribed by 2.38 times on the first day only.
For those who miss previous issues of tax-free bonds, another chance with even bigger issue of tax-free bond of NHAI is on the verge. CBDT permitted NHAI to raise Rs.24,000 crore through tax-free bonds during the Fiscal 2016 but in first tranche NHAI is going to raise only Rs.10,000 for which subscription are going to open on 17th December and would allocate on first come first serve basis till 31st December. Let’s analysis the issue and decide whether you should invest in NHAI tax-free bonds or should wait couple of months for IRDEA or HUDCO tax-free bonds to arrive.
About National Highway Authority of India (NHAI)
National Highway Authority of India was established in 1988 as an autonomous body under Ministry of Road Transport and Highways. NHAI works towards development, maintenance, management and operation of National Highways, totaling around 93,000 km in length. NHAI also collects tolls at various highways in India.
Features of NHAI Tax-Free Bonds 2015
- Offer Period starts from Tuesday, December 17thand would end on Monday, December 31st, 2015 but can be pre-closed on full subscription.
- NHAI Tax-Free Bonds are rated AAA by CRISIL, ICRA, CARE and IRRPL. It implies high degree of safety regarding timely servicing of financial obligations and carry very low credit risk.
- Annual Coupon Rates for Retail Investors (investment < Rs.10 lakhs) are 7.39% p.a. for 10 Years and 7.60% p.a. for 15 Years. First tranche of NHAI tax-free bonds 2015 do not offer 20 years bonds.
- Annual Coupon Rates are 0.25% less for non-retail investors i.e. HNIs, QIBs and corporate subscribers.
- First interest would be paid on April 1st, 2016 and subsequently on April 1st of every year.
- The yearly interest will be paid without deducting any TDS.
- Non-Resident Indians (NRIs) can too invest in NHAI Tax-Free bonds but on non-repatriation basis only.
- Price of each bond is Rs.1,000 and the total issue size is Rs.10,000 crore.
- Minimum Investment is as low as Rs.5,000 i.e. 5 Bonds and further in multiple of 1 bond thereof.
- Maximum Investment Limit for Retail Investor is capped at Rs.10 Lakhs.
- Allotment would be based on First Come First Serve.
- NHAI Tax-Free Bonds would be listed on Bombay Stock Exchange (BSE) as well as on National Stock Exchange (NSE) and probable date of listing would be 12 days from the date of closure of issue.
- NHAI Tax-Free Bonds comes with no lock-in period and can be easily bought and sold in the secondary market. However, Exit through secondary market will attract capital gains tax.
- No tax deduction for the investment amount can be claimed u/s 80C.
- Investors can hold NHAI tax-free bonds in DEMAT as well as physical form.
- Lead Managers are SBI Capital Markets Limited, A.K. Capital Services Limited, Axis Capital Limited, Edelweiss Financial Services Limited, ICICI Securities Limited.
- Karvy Computershare Private Limited is the registrar of the Issue.
- For more information download the NHAI Tax-Free Bonds 2015 Prospectus HERE.
- Download NHAI Tax-Free Bonds 2015 Application Form
NHAI Tax-Free Bonds Annual Yield
Category wise Allocation of NHAI Tax-Free Bonds 2015
How to Apply/Invest in NHAI Tax-Free Bonds?
Investors can apply through their DEMAT Account as well as in Physical Forms. In either ways you can get interest payment in your bank account through ECS.
Also, in case you apply for tax-free bonds in DEMAT form and later wish to rematerialize it. You can do it by simply writing it to your DP.
Should You Invest in NHAI Tax-Free Bonds 2015?
Tax-Free Bonds are for people who are completely risk-averse and would like to see their capital completely safe with moderate return. However, I would not suggest young investors to go with tax-free bonds because there are various other options to fetch better returns with moderate returns.
Despite of reduced interest rates by NHAI from their last issue of tax-free bonds, the rates are pretty impressive and even for the investors falling in 10% tax slab, annual yield of 8.24% looks considerable.
I would advise to invest a part of your portfolio in NHAI tax-free bonds for 15 years because the annual yield of 8.47% p.a. for long-term is very attractive and in the falling interest rate scenario parking your funds to earn a regular income at a fixed interest rate without worrying of filing any documents/forms like 15G or 15H would be a good bet.