Note - IIFCL Infrastructure Bond


 

 

 

Indian Infrastructure Finance Company Limited issues tax-saving infrastructure bonds

 

·                    First Bond Issue by a Government of India enterprise with tax benefits under Sec 80CCF of the Income Tax Act, 1961.

·                    Resident Indian individuals and HUFs eligible for deduction of up to Rs 20,000 in computation of taxable income for the current financial year (2010-11)

·                    Bonds to be issued in physical and in dematerialized form at the option of investors

·                    Credit rating of:

v     “AAA/Stable” from CRISIL

v     “CARE AAA” from CARE

·                    Issue opens February 4,  2011 and closes March 4, 2011

·                    Bonds offered in four series, with buyback option with different interest payment options

·                    Proposed to be listed on BSE. The bonds are tradable, post lock-in period of five years.

 

India Infrastructure Finance Company Limited (“the Company” or “IIFCL”) has announced a public issue of long term infrastructure bonds to raise an amount of up to Rs 1,200 crore, in one or more tranches, in the financial year 2010-11. The Issue proceeds are proposed to be used for the Company’s infrastructure lending activities. The Issue proceeds are proposed to be used for the Company’s infrastructure lending activities.

 

Relevant dates: The Issue opened for subscription from Friday, February 4, 2011, and will close on Friday, March 4, 2011, or on such earlier date or extended date, as may be decided by the Board.

 

Issue Structure: The 8.15%, non-cumulative Bonds (“Series 1 Bonds”), the 8.15%, cumulative Bonds (“Series 2 Bonds”), the 8.30% non-cumulative Bonds (“Series 3 Bonds”) and the 8.30% cumulative Bonds (“Series 4 Bonds”) (Series 1 Bonds, the Series 2 Bonds, Series 3 Bonds and Series 4 Bonds are collectively referred to as the Bonds) for an aggregate amount up to Rs. 1,200 crore to be issued by the Company in Fiscal 2011, subject to not exceeding 25% of the incremental infrastructure investment made by the Company in Fiscal 2010.

 

Listing: The Bond is proposed to be listed on the Bombay Stock Exchange (“BSE”). They are subject to statutory lock-in for a period of five years from the deemed date of allotment. Trading is permitted in dematerialized form only following expiry of the Lock-in Period.

 

Ratings by two agencies: The Bonds have been assigned a credit rating of “AAA/Stable” by CRISIL and “CARE AAA” by CARE indicating ‘Highest Safety’ with regard to timely payment of interest and repayment of principal amount of the bonds.

 

Long-term borrowings of the Company enjoy credit rating of “LAAA(SO)” by ICRA, “AAA(SO)/Stable” by CRISIL and “AAA(ind)(SO)” by FITCH.                                                                                            

 

Security: Bonds issued by the Company will be secured by an exclusive first charge on the receivables of the Company, with an asset cover of one time of the total outstanding amount of Bonds, as may be agreed between the Company and the Debenture Trustee, pursuant to the terms of the Debenture Trust Deed.

 

The profile on the each series of bonds under the first tranche is as under:

 

Series

1

2

3

4

Face Value per Bond

Rs. 1,000

Rs. 1,000

Rs. 1,000

Rs. 1,000

Frequency of Interest payment

Annual

Cumulative

Annual

Cumulative

Buyback Facility

 

-

-

-

-

Buyback Date

One date, being the date falling five years and one day from the Deemed Date of Allotment

 One date, being the date falling five years and one day from the Deemed Date of Allotment

One date, being the date falling seven years and one day from the Deemed Date of Allotment

One date, being the date falling seven years and one day from the Deemed Date of Allotment

Buyback Amount

Rs. 1,000 per Bond and accrued interest calculated from the last interest payment date to the Buyback Date

Rs. 1,480 per Bond

Rs. 1,000 per Bond and accrued interest calculated from the last interest payment date to the Buyback Date

Rs. 1,747 per bond

Buyback Intimation Period

The period beginning not more than nine months prior to the Buyback Date and ending not later than six months prior to the Buyback Date

 The period beginning not more than nine months prior to the Buyback Date and ending not later than six months prior to the Buyback Date

The period beginning not more than nine months prior to the Buyback Date and ending not later than six months prior to the Buyback Date

The period beginning not more than nine months prior to the Buyback Date and ending not later than six months prior to the Buyback Date

Interest Rate

8.15%

8.15%

 

8.30%

8.30%

Redemption/ Maturity Date

 

One date, being the date falling ten years from the Deemed Date of Allotment

One date, being the date falling ten years from the Deemed Date of Allotment

One date, being the date falling fifteen  years from the Deemed Date of Allotment

One date, being the date falling fifteen  years from the Deemed Date of Allotment

Maturity Amount

Rs. 1,000 per Bond and accrued interest calculated from the last interest payment date to the Buyback Date

Rs. 2,189 per Bond

Rs. 1,000 per Bond and accrued interest calculated from the last interest payment date to the Buyback Date

Rs. 3,307 per bond

 

80CCF tax benefits: The Bonds are classified as “long term infrastructure bonds” and are being issued in terms of section 80CCF of the Income Tax Act, 1961. In terms of the notification of Section 80CCF, an amount, not exceeding Rs. 20,000 per annum, paid or deposited as subscription to long term infrastructure bonds during the previous year relevant to the assessment year beginning April 01, 2011, shall be deducted in computing the taxable income of a resident individual or Hindu Undivided Family (HUF). In the event that any applicant applies for the bonds in excess of Rs. 20,000 per annum, the aforestated tax benefit shall be available to such applicant only to the extent of Rs. 20,000 per annum.

 

The Lead Managers to the Issue are ICICI Securities Limited, SBI Capital Markets Limited, A.K. Capital Services Limited, Bajaj Capital Limited, Enam Securities Private Limited, Karvy Investor Services Limited, RR Investors Capital Services (Private) Limited and YES Bank Limited. IL&FS Trust Company Limited is the debenture trustee for the Bonds.

 

About IIFCL:

INDIA INFRASTRUCTURE FINANCE COMPANY LIMITED (IIFCL), a wholly-owned ‘Government company‘, incorporated under the Companies Act in January 2006, pursuant to the SIFTI, commenced operations in April 2006 and were notified as a public financial institution in January 2009. It provides financial assistance to long-term infrastructure projects, in the sectors of roads, railways, seaports, airports, inland waterways, other transportation projects, power, urban transport, water supply, sewage, solid waste management and other physical infrastructure in urban areas, gas pipelines, infrastructure projects in special economic zones, and international convention centres and other tourism related infrastructure projects.

 

IIFCL also provides refinance for loans sanctioned by banks and other eligible institutions, in accordance with the eligibility criteria set out in the Refinance Scheme. The GoI has identified infrastructure development as a key priority in its five year plans, and has emphasized the role of public-private partnership (‘PPP’) towards this growth. The Eleventh Five Year Plan (Fiscal 2008 to 2012) envisages investments of US$ 514 billion in the Indian infrastructure sector. In accordance with the GoI policy to boost infrastructure through PPP projects, our lending initiatives are, under the SIFTI, primarily focused on PPP projects, or projects awarded through competitive bidding.

 

IIFCL has one wholly owned subsidiary, India Infrastructure Finance Company (UK) Limited (‘IIFC (UK)). IIFC (UK) was incorporated on February 7, 2008 under the laws of England, to supplement its role and functions by utilizing part of India‘s foreign exchange reserves for the creation of infrastructure assets by way of lending to Indian companies implementing infrastructure projects, solely for meeting their capital expenditure outside India. IIFC (UK) has been provided a line of credit of US$ 5 billion by the RBI for issuing US$ denominated bonds with a tenure of 10 years to on-lend the resources to Indian infrastructure companies for meeting their capital expenditure outside India. Under this line of credit, IIFC (UK) has raised the first tranche of US$ 250 million, and has sanctioned US$ 1.95 billion to 17 projects and disbursed US$ 133.45 million, as on September 30, 2010.

 

IIFCL also contributes, along with Infrastructure Development Finance Company Limited (‘IDFC’), and Citigroup Inc., in the India Infrastructure Fund. The India Infrastructure Fund was constituted in 2007, with the objective being to collectively facilitate large scale capital investments in infrastructure assets in India through a combination of long term debt and equity capital raised in several tranches. The India Infrastructure Fund is registered with SEBI as a domestic venture capital fund. Cumulative gross loans sanctioned by us as on September 30, 2010 aggregated to Rs. 27,500 crores, in 154 projects with total project cost of Rs. 231,371 crores and total disbursement of Rs. 11,133 crores (including refinance).

 

As on September 30, 2010, 105 of the 124 projects (excluding PMDO projects) for which the Company has sanctioned finances were being carried out through PPP mode, representing 85% of our total consolidated loan portfolio. Of the total number of projects financed by us, 21 projects had achieved commercial operation as on September 30, 2010. Its major exposures are presently in the power, road and airport sectors. As on September 30, 2010, IIFCL’s a debt-equity ratio was 7.86.

 

As on March 31, 2010 and September 30, 2010, it had no non-performing advances. Its long-term borrowings enjoyed LAAA/SO rating from ICRA, AAA/SO/Stable from CRISIL and AAA(ind)(SO) from Fitch.

 

 

 

 

 

 

 

 


 

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