Another bonds issue with 80CCF tax benefits: The IIFCL 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).

This is the first Bond Issue by a Government of India enterprise. Other issues reviewed.

Let's start with the features

·   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.

Details:

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:

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