Rural Electrification Corporation Limited to raise Rs 3,000 crore through issue of tax-free bonds this fiscal
State-run Rural Electrification Corporation Limited (REC) has received the Finance Ministry's approval to raise Rs 3,000 crore through issue of tax-free bonds this fiscal year. “REC has been authorised to issue, through a public issue, during the financial year 2011-12, tax-free, secured, redeemable, non-convertible bonds of rupees 1,000 each, aggregating to rupees Rs 3,000 crore...," the Finance Ministry said.
REC Director H D Khunteta commented "We plan to utilise the proceeds mainly for loan disbursements.”
The interest rate on the bonds will not be less than 50 basis points below the yields on Government Securities (G-secs).
However, "a higher coupon rate of up to 20 basis points may be offered to retail individual investor vis-a-vis the rate offered to Qualified Institutional Buyers (QIBs), corporate and High Networth Individuals (HNIs)," the ministry added.
Bonds are offered in two series one in 10 years maturity and another in 15 years maturity. A leading lender for the power sector, REC had planned to mop up to Rs 28,000 this fiscal and so far, about Rs 23,000 crore has been raised.
REC is one of the only 16 Indian public sector undertakings to be given “Navratna” status by the Department of Public Enterprise by virtue of its operational efficiency and financial strength. It offers a safe tax free investment at a good interest rate. Investors in the highest tax bracket can consider this investment for some proportion in fixed income asset class.
REC was advised by leading law firm MV Kini & Co. Having worked on similar transaction before MV Kini & Co are leading experts in the area. MV Kini & Co also has particular expertise in the banking and project finance areas. With clients such as the Punjab National Bank and the Bank of Baroda, the firm provides advice for a range of entities including various government authorities.
MV Kini & Co. was ranked 2nd in Public Debt Offer by Prime: The Primary Market Monitor in its ranking for APRIL 2008 to DECEMBER 2011
The team was led by Managing Attorney Ravi Kini.
Legal Adviser to Rural Electrification Corporation
Managing Attorney Ravi Kini commented:
“this is last of Issue the tax free bond issued by Public Sector Undertaking (PSU’s) engaged in the infrastructure sector in ongoing fiscal year 2011-2012. He said this issue has a feature of additional interest of 20 basis points for retail investors in primary market. Allotment shall be on first come first serve basis. The proceeds of the issue shall be utilized towards general lending operations of the Company.”