NHAI plans Rs 5,000 crore tax-free bonds

October 31, 2013

By Anuradha Himatsingka, ET Bureau |

KOLKATA: National Highways Authority of India plans to launch a tax-free bonds issue to mop up about Rs 5,000 crore by December, an official said. “The process has already begun. We will soon mandate a merchant banker for the same,” Satish Chandra, member (finance) at the state-owned autonomous agency, told ET.

The highways authority, or NHAI, which is responsible for all the national highways in the country, has already notified top merchant bankers and roped in rating agencies Crisil BSE -1.14 %, Care and Brickwork Ratings India for the proposed issue. Delhi-based M V Kini & Co will be its legal advisor.The proposed issue will be subject to statutory approvals.An NHAI official said the money raised will be used for future investment needs as the agency currently has some Rs 4,000 crore of cash in its books. “We do not need funds immediately for two reasons: we still have some cash in hand and execution work on several projects — some 11-12 of them — is yet to take off due to economic slowdown,” the official said.

A person familiar with the development, however, said the highways ministry is not yet convinced about the proposed issue and has sought an explanation from NHAI. Last year, the agency had failed to issue Rs 10,000 crore of bonds, though the same was sanctioned.

Incidentally, ongoing tax-free bonds of state owned entities India Infrastructure Finance Company and Power Finance Company are yet to catch retail fancy. Both the issues are yet to achieve the retail subscription target of 40% of the overall issue size. The issues are offering a few basis points lower rate of interest in select maturities compared with the earlier ones.

Also, with a gush of issues, including those of Rural Electrification Corporation BSE -0.68 %and National Hydroelectric Power Corporation, having already hit the market, investor appetite appears to have waned.

A market analyst said that only higher rate of interest can now get retail investors back into tax-saving bonds this fiscal year.

Source-http://economictimes.indiatimes.com