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NHAI tax-free bond issue subscribed two times

The public issue of tax-free bonds by the National highways Authority of India (NHAI) has been subscribed by almost two times on the first day, according to merchant bankers.

The subscription for ~10,000 crore of tax-free bonds, which opened today, may close by Friday, instead of the scheduled closure on January 11. SBI Capital Markets, A KCapital, Kotak Mahindra Bank, and ICICI Securities are the lead managers for the issue. The bonds have been rated 'AAA' by Crisil, CARE and Fitch.

NHAI had the option of either closing the issue after a minimum of three days, or extend it by 30 days.

NHAI received ~12,000 crore against ~4,000 crore reserved for qualified institutional investors, ~6,000 crore against ~3,000 crore reserved for high net worth individuals and ~1,000 crore against ~3,000 crore reserved for the retail segment.

JN Singh, member (finance), NHAI, said the response for the issue was overwhelming. "The issue may be closed before schedule, if it is oversubscribed," he said. He, however, did not confirm the figures. NHAI had received the ministry's approval to raise up to ~10,000 crore through the sale of tax-free bonds in the current financial year.

The bonds carry a coupon rate of 8.2 per cent on 10-year maturities and 8.3 per cent on 15-year maturities. The coupon rate on these bonds is not taxable, and should not be less than 50 basis points lower than the yield on government securities of the same residual maturity, as reported by the Fixed Income Money Market and Derivatives Association on the last working day of the month preceding the month of the issue.

In case the companies choose to place the bonds privately, the coupon rate on the bonds would not be less than 100 basis points lower than the yield on government securities of the equivalent residual maturity.

In the 2011-12 Union Budget, approvals were given to NHAI, Housing Urban Development Corporation (Hudco), Indian Railway Finance Corporation (IRFC) and Power Finance Corporation (PFC) to raise ~30,000 crore through tax-free bonds. While Hudco and PFC have already issued these bonds, IRFC is yet to tap the debt market with these instruments.

Good response may allow the authority to close the issue this week

The bonds carrya coupon rate of8.2 per centon 10-year maturities and 8.3 per centon 15-year maturities
 
 
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