Everything you need to know about IRFC tax free bonds
Written on Friday, December 4, 2015
By Mohit Mittal- AVP & Head Fixed Income, Bajaj Capital Ltd.
IRFC will open subscription on 8th Dec 2015 for an issue size of Rs. 4532 Crores. There is a minimum application size of 5 bonds (individually or collectively) with a face value of Rs. 1000 per bond. The public issue will be available in physical and demat mode. Returns on tax free bonds are guaranteed and this issue carries AAA rating from credit rating agencies like ICRA, CRISIL and CARE. Making it more attractive the bond is proposed to be listed on BSE and NSE.
What is the Issue Size?
Rs. 1,00,000 lakhs with an option to retain oversubscription upto Rs. 3,53,200 lakhs aggregating to Rs. 4,53,200 lakhs
What is the Credit Rating for this Bond and how secure it is?
“CRISIL AAA/ Stable” by CRISIL, “[ICRA] AAA” by ICRA and “CARE AAA (Triple AAA)” by CARE.
The Bonds issued by the Issuer will be secured by creating a first pari-passu charge on the movable assets of the Issuer comprising of rolling stock such as wagons, locomotives and coaches by a first pari passu charge, present and future, as may be agreed between the Issuer and the Debenture Trustee, pursuant to the terms of the Debenture Trust Deed and applicable laws.
What is the face value/Issue Price of these Bonds?
Rs. 1000/- Per Bond is the face value.
What is the frequency of interest payment and what are the interest payment dates?
Interest shall be paid Annually for all categories of applicant.
First Interest Payment date is on October 15, 2016 and subsequently on October 15 of every year except the last interest payment along with the redemption amount.
What is the minimum application amount?
5 bonds (Rs. 5,000), individually or collectively across all Series of Bonds and in multiples of 1 Bond (Rs. 1,000) thereafter.
Can applicant apply in physical mode? Is there any Specific Investor category which is not allowed Physical Application?
Yes, applicant can apply in Dematerialized form or in physical form at the option of applicant. However, eligible Qualified Foreign Investor (QFIs), Foreign Institutional Investor (FFIs) and Foreign Portfolio Investor (FPIs) will be allotted bonds in demutualized form only.
Who is not eligible to invest in the issue?
Applications cannot be made by:
(a) Minors without a guardian name (A guardian may apply on behalf of a minor. However, Applications by minors must be made through Application Forms that contain the names of both the minor Applicant and the guardian).
(b) Foreign nationals, other than Eligible FPIs/FIIs/QFIs and except as may be permissible under CBDT Notification or under applicable law including but not limited to regulations, circulars, guidelines etc. stipulated by RBI and/or SEBI.
(c) Foreign nationals including FPIs, FIIs, QFIs and NRIs who are (i) based in the USA, and/or, (ii) domiciled in the USA, and/or, (iii) residents/citizens of the USA, and/or, (iv) subject to any taxation laws of the USA.
(d) Overseas Corporate Bodies.
(e) Indian Venture Capital Funds.
(f) Foreign Venture Capital Investors.
(g) Persons ineligible to contract under applicable statutory/ regulatory requirements.
Can the application be made on joint names?
Yes, application can be made in joint names subject to following conditions:
Applications should be in single or joint names and not exceeding three names, and in the same order as their Depository Participant details. If the Application is submitted in joint names, the Application Form should contain only the name of the first Applicant whose name should also appear as the first holder of the depository account held in joint names. If the DP account is held in joint names, the Application Form should contain the name and PAN of the person whose name appears first in the depository account and signature of only this person would be required in the Application Form.
Are these bonds eligible for listing on exchanges?
The Bonds are proposed to be listed on BSE and NSE. BSE shall be Designated Stock Exchange for the issue.
What is the interest on application monies received which are used towards allotment of Bonds?
Issuer shall pay interest on Application Amounts on the amount Allotted, subject to deduction of income tax under the provisions of the Income Tax Act, as applicable, to any Applicants to whom Bonds are allotted (except for ASBA Applicants) pursuant to the Issue from the date of realization of the cheque(s)/demand draft(s)/or any other mode upto one day prior to the Deemed Date of Allotment, at the rate of 7.07%p.a., 7.28% p.a. and 7.25% p.a. on Tranche I Series IA, Tranche I Series IIA and Tranche I Series IIIA respectively for Allottees under Category I, Category II and Category III Portion, and at the rate of 7.32% p.a., 7.53% p.a. and 7.50% p.a. on Tranche I Series IB, Tranche I Series IIB and Tranche I Series IIIB respectively for Allottees under Category IV Portion.
What is the interest on Application Monies received which are liable to be refunded?
Issuer shall pay interest on Application Amounts which is liable to be refunded to the Applicants (other than Application Amounts received after the Issue Closing Date, and ASBA Applicants) subject to deduction of income tax under the provisions of the Income Tax Act, as applicable, from the date of realization of the cheque(s)/demand draft(s) upto one day prior to the Deemed Date of Allotment, at the rate @ 5% per annum. Such interest shall be paid along with the monies liable to be refunded. Interest warrant will be dispatched/credited (in case of electronic payment) along with the letter(s) of refund at the sole risk of the Applicant, to the sole/first Applicant.
Who is to be favored in Cheque Name in normal case and in case of NRI?
1. The payment instruments from all resident Applicants shall be payable into the Escrow Accounts drawn in favour of “IRFC Tax Free Bonds 2015 – Escrow Account - R”. 2. The payment instruments from all FPIs, FIIs, Eligible QFI and Eligible NRI Applicants and other non-resident Applicants across all Categories shall be payable in the Non Resident Escrow Accounts drawn in favour of : If on repatriation basis: “IRFC Tax Free Bonds 2015 – Escrow Account – NR Repat” If on non-repatriation basis “IRFC Tax Free Bonds 2015 – Escrow Account – NR Non-Repat”.
What is the tenure of these bonds and what is the basis of allotment?
10 Years, 15 Years, 20 Years from the Deemed Date of Allotment.
QIB- 15% of the Issue Size
Corporates- 20% of the Issue Size
HNI Portion- 25% of the Issue Size
Retail Individual Investor - 40% of the Issue Size
Can an applicant trade the bonds in the market?
Yes. The Bonds will be listed on BSE and NSE. The trading of the Bonds shall be in dematerialized form only.
Can an applicant make additional/multiple applications?
An Applicant is allowed to make one or more Applications for the Bonds for the same or different Series of Bonds. However, multiple Applications by the same Applicant belonging to Category IV aggregating to a value exceeding Rs. 10,00,000 shall be grouped in Category III, for the purpose of determining the basis of allotment to such Applicant. However, any Application made by any person in his individual capacity and an Application made by such person in his capacity as a Karta of an HUF and/or as joint Applicant (second or third applicant), shall not be deemed to be a multiple Application.
Who can apply for bonds through ASBA?
All categories of eligible applicants can apply through ASBA mode. However, an applicant who wishes to be allotted bonds in physical form cannot apply for bonds through ASBA process.
Can applicant make non-ASBA applications through Demand Draft?
Yes, applicant can make payments for the application money by way of “at par cheque” or “Demand Draft”.
Can NRI apply using DD? NRI Cheque will be accepted from which Account NRE or NRO?
Yes, The application amount can be paid either by way of inward remittance of freely convertible foreign exchange through normal banking channels i.e. through rupee denominated demand draft / cheques drawn on a bank in India.
Further details about the application by NRI on a repatriable and non-repatriable basi is as follows:
1. In case of Eligible NRIs applying on repatriation basis: The Application Amounts are to be paid by transfer of funds held in the Investor’s Non Resident External (“NRE”) Account/ Foreign Currency Non Resident (“FCNR”) Account maintained with an RBI authorised dealer or a RBI authorised bank in India.
2. In case of Eligible NRIs applying on non-repatriation basis: The Application Amounts are to be paid by transfer of funds held in the Investor’s Non Resident Ordinary (“NRO”) account/ NRE Account/ FCNR Account/ Non Resident Non Repatriable (“NRNR”) Account/ Non Resident Special Rupee (“NRSR”) Account/any other permissible account in terms of FEMA, maintained with an RBI authorised dealer or a RBI authorised bank in India.
Can NRI apply in this Issue?
Yes, eligible NRI can apply on a repatriable as well as nonrepatriable basis. except following categories of investors (i) Investor who is based in the United States of America, (“USA”), and/or, (ii) domiciled in the USA, and/or, (iii) residents/citizens of the USA, and/or, (iv) subject to any taxation laws of the USA.
Can NRI apply in Physical format?
Yes, under this issue eligible NRI’s, are allowed to make an application in Physical form. However, FPIs, FIIs and QFIs are not authorized to make application in Physical form.
Can Third party Cheque be accepted?
As per terms of prospectus there is no specific restriction given on accepting Third party cheque for payments. However, Company has specifically mentioned procedure for refund of application money for bonds held in physical form and the refunds will be extracted from the application form or cheque copy attached. Therefore, there are chances of refund being credited to third party account, in case of application being made through third party cheque. Due to above reasons it is advisable to not to make application through Third party cheques.