Skip to main content

L&T Infrastructure bond

 

 

L&T Infra's bond issue seems to be a suitable investment for those who have still not invested in infra bonds for tax saving. But others can give it a miss



Issue details:

Company Name: LTIF
Issue Size: 200 cr
Face Value: 1000/ Bond
Issue Date: Oct 15-NOV 2


L&T Infrastructure Finance (LTIF) is coming out with an infrastructure bond to raise capital to fund its growth plans. The move comes on the back of LTIF being accorded the status of infrastructure finance company (IFC). While the issue terms are on similar lines to the earlier issue of IDFC, investors should consider investing only for the tax rebate attached to it.

BACKGROUND:

As per the current norms, IFCs can raise up to 25% of their gross disbursements in FY10 through bonds. While the company is not publicly listed, bonds would be tradable on the National Stock Exchange, post the lock-in period of five years.


   While a portion of the proceeds might be used to meet the issue expenses, majority of it will be used for boosting its infrastructure lending business. Earlier this month, IDFC also came out with a similar bond issue.


   With the government providing the tax shield for investments in infrastructure bonds over and above the maximum limit of Rs 1 lakh under Section 80C of the Income-Tax Act, other IFCs might also hit the market with similar issues.

BUSINESS:

Set up in 2007 as a nonbanking finance subsidiary of L&T, the company is primarily focused on providing debt finance to infrastructure projects. The company was given the IFC status in July 2010. It can thus access long-term funds to meet its growth plans. To add to this, the limit of bank financing and external commercial borrowings has also increased.


   The company has a diversified disbursement mix with the power sector forming almost 39% of its advances. Apart from this, the company also provides financing to companies in the telecom, roads, oil and gas, ports and other infrastructure sectors such as logistics, SEZs, etc.

FINANCIALS:

LTIF has grown at a fast pace since its inception. The company recorded a 60% compounded annual growth rate (CAGR) in its total income in the past three years. Total income for FY10 stood at Rs 4,504 crore. The surge can be attributed to the rise in loans or advances. Net loans of the company almost doubled in FY10 to Rs 4,255 crore. Last year, LTIF saw almost 50% hike in its interest costs. Even after this, the increase in net profit has been substantial. Net profit at the end of FY10 stood at Rs 110.8 crore, up 45% from the year-ago period. In fact, the company averaged 57% growth in net profit since FY08.


   Moreover, the company is adequately capitalised with its capital adequacy ratio being 22% vis-à-vis the 15% minimum required for an IFC. A strong capital base will help the company scale up operations at a fast pace.

RETURNS ON INVESTMENT:

The company is issuing the bond in four different series (see table). Though the bond seems to be giving a yield of 7.75% or 7.5%, based on the series chosen, the actual yield to investors will be higher accounting for the inherent tax advantage in the bond. To add to this, investors will have the option to redeem the principal from the company at the end of 5 or 7 years.


   Assume an investor in the tax bracket of 30.9%, who invests in the Series 3 of the bond issue and intends to exercise the buyback option at the end of five years.


   The yield on investment for such an investor could go as high as 13%, considering the tax benefit in the first year and annual tax-adjusted interest income.


   If not for the attached tax benefits, the yields and lock-in of these bonds mean investors would be better off investing in other avenues such as bank fixed deposits.

 

Popular posts from this blog

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

BHIM App

What is BHIM? BHIM stands for Bharat Interface for Money , which is an easy way of transferring money from one bank account to an other via a smartphone using the Unified Payments Interface (UPI) platform . It is an instant payments application meant for sending money as well as requesting for payments. How is it different from UPI? BHIM is no different than UPI. But in the case of BHIM, customers don't have to download mobile applications of multiple banks, instead a single BHIM app downloaded from Android Play Store is sufficient. Other than that, payments can be made through a virtual payments ID or through account number and IFS code, same as UPI. What you need to use BHIM? BHIM can be used across an droid smartphones with version 4.0 and above, also it will be made available on iPhones and Windows smartphones very soon. Further, for feature phone users they need to use the USSD feature by dial ing *99#. Why was the need for BHIM felt when UPI is already in place? With various...

NPS for Tax Saving

The NPS is a great way to save tax if you don't mind locking in your money till you retire. Till last year, the taxability of the NPS was a big issue. But last year's Budget changed the rules and made 40% of the corpus tax free. The PFRDA wants that the balance 60% to be exempt from tax as well. The emphasis is on increasing pension coverage. So, allowing EEE status (to NPS ) is our major demand (in the Budget NPS is especially useful for investors who may have exhausted the `1.5 lakh investment limit under Section 80C but want to save more.   Another way the NPS can cut tax is by rejigging the salary.If a company deposits up to 10% of the basic salary of an employee in the NPS under Section 80CCD(2d), the amount will be tax free. Turn to page 28 to see how much tax this can save. However, the take-home pay of the employee will come down. Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax...

SBI Long Term Advantage Fund Series

Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax Saver Mutual Funds for 2017 - 2018 Best 10 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. ICICI Prudential Long Term Equity Fund 5. Birla Sun Life Tax Relief 96 6. Franklin India TaxShield  7. Reliance Tax Saver (ELSS) Fund 8. BNP Paribas Long Term Equity Fund 9. Axis Tax Saver Fund 10. Birla Sun Life Tax Plan Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave your comment with mail ID and we will answer them OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com OR Call us on 94 8300 8300  

NRI from Canada and US Invest in Mutual Funds in India

Investing in Indian mutual funds by NRIs from US and Canada As of December 2016, eight Indian fund houses were accepting investments from US/Canada-based NRIs Most of the Indian mutual fund houses have stopped accepting funds from US and Canada based NRIs due to regulatory restrictions. This is because the Foreign Account Tax Compliance Act (FATCA) makes it compulsory for all financial institutions in the world to report comprehensive details of all transactions involving US/Canada residents, (including non-resident Indians) to the US & Canada Government. Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now