UNFAZED by uncertainty in the capital markets, the National Highways Authority of India (NHAI) will launch its first ever tax-free bonds issue of Rs 10,000 crore on December 28.
The issue will close on 11 Jan 2012, a senior road transport ministry official said.
The official further said the interest (coupon) rate of the bonds issue will be between 8 and 8.5 per cent, while refusing to disclose the exact number.
"A formal announcement will be made by road transport minister CP Joshi and you should wait for that," the official said, adding that the money raised from it will be used to partly finance various national highways projects under different government schemes.
"Some money will also be used for viability gap funding for BOT (build-operate transfer) road contracts," the official added.
As per the prospectus filed by NHAI with the market regulator, the Securities and Exchange Board of India (Sebi), the bonds will have two maturity periods of 10 and 15 years, and would get listed on the BSE and the National Stock Exchange.
In this year's budget, the government had allowed NHAI to raise Rs 10,000 crore from the tax-free bonds, an instrument never used by it earlier. Till now, it used to raise funds through issue of 54EC bonds, under which subscribers can claim exemption of capital gains tax.
Citing the provisions of income tax rules, the NHAI prospectus has, however, clarified that only the interest earned on the new bonds will be tax-free, not the actual investments.
Moreover, investors will be liable to pay capital gains tax as applicable, it further said.
According to the NHAI prospectus, the bonds issue will worsen its debt-to-capital ratio from 0.11 to 0.29 if it raises Rs 10,000 crore from the markets. The debt-to capital ratio reflects the financing strengths of a firm.
Higher the ratio, the more debt the company has, compared to its equity.
As of June 30, the NHAI's total debt (including secured loans) stood at Rs 6,636.21 crore.
The bond issue has got AAA (stable) rating from the three agencies — Crisil, CARE and Fitch.
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