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| SREI Tax Free Bond |
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Company profile
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| SREI Infrastructure Finance Ltd (SREI) was incorporated in 1985, and
is registered with the RBI as a systemically important non deposit
taking NBFC and an IFC. With a large customer base and over Rs
26,001 cr of Consolidated Assets Under Management, SREI has a pan-
India presence with a network of 82 offices. Disbursements have
grown at a CAGR of 99.66% between FY 2009 and 2011. Net NPA as
on Sept 2011 was 0.08%.
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Salient features of the bond issue (Tranche I) |
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- The Tranche 1 Bonds are classified as “LONG TERM
INFRASTRUCTURE BONDS” and are being issued in terms of
Section 80CCF of the Income Tax Act and the Notification.
- Issue Opens on 31st December 2011 and Closes on 31st January 2012.
- Credit rating agency CARE has rated the bonds “CARE AA”
with stable outlook, indicating high safety. Such instruments
carry very low credit risk.
- These bonds will be issued only to Resident Indian Individuals
(Major) and HUF (through the Karta). Bonds are available to
investors in DEMAT as well as Physical form.
- The bonds are fully secured with exclusive charge on specific
receivables and pari passu charge on its ownership flat situated
at Salimpore Road, Kolkata. Security cover will be 1.0 time of
the outstanding Bonds at any point in time.
- The Bonds bear an attractive combination of coupon rate 8.9-
9.15% p.a. coupled with tax benefits of upto Rs 20,000 under
Sec 80 CCF.
- The Company shall pay to the successful Applicants, interest @
5% p.a. on the Application Money on the amount allotted.
- The Company shall NOT pay any interest on refund of
Application Money on the amount not allotted.
- The bonds will be listed on BSE. No TDS shall be deducted
from interest on Tranche I Bonds, if such bonds are held in
DEMAT form.
- Investors can pledge or hypothecate these bonds to avail loans
after the lock-in period.
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| Under Section 80 CCF of the I.T. Act, an investor in such infrastructure
bonds will be entitled to tax deduction of investments of up to Rs
20,000. The deduction is over and above the Rs 100,000 deduction
available under section 80C, 80CCC & 80CCD read with section
80CCE.
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Issue Structure: (Tranche I) |
| Minimum application: 1 Tranche I bonds and in multiple of one bond thereafter. The bonds can be of the
same series or across different series.
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| Lock in: 5 years from the date of allotment. |
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| Buyback facility: Available for all the Series of Tranche I bonds. |
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| Bond Issue Profile: (Tranche I) |
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| Options |
Series - I |
Series - II |
Series - III |
Series - IV |
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| Interest Payment |
Annual |
Cumulative |
Annual |
Cumulative |
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| Face Value(Rs. / Bond) |
Rs.1,000/- |
Rs.1,000/- |
Rs.1,000/- |
Rs.1,000/- |
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| Coupon (%)p.a. |
8.9% |
8.9% (compounded annually) |
9.15% |
9.15% (compounded annually) |
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| Yield on Maturity (%) ^ |
8.9% |
8.9% (compounded annually) |
9.15% |
9.15% (compounded annually) |
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| Maturity |
10 years |
10 years |
15 years |
15 years |
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| Redemption Amount per bond |
Rs 1,000 per bond +accrued interest |
Rs 2,346.73 per bond +interest on application money compounded annually |
Rs 1,000 per bond +accrued interest |
Rs 3,718.40 per bond +interest on application money compounded annually |
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| Buy back Facility |
YES |
YES |
YES |
YES |
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| Buyback Date (from allotment) |
Date falling 5 years and one day from the Deemed Date of Allotment |
Date falling 5 years and one day from the Deemed Date of Allotment |
Date falling 5 years and one day from the Deemed Date of Allotment |
Date falling 5 years and one day from the Deemed Date of Allotment |
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| Buyback Intimation Period |
The period commencing from 9 months preceding the relevant Buyback Date and ending 6 months prior to such Buyback Date |
The period commencing from 9 months preceding the relevant Buyback Date and ending 6 months prior to such Buyback Date |
The period commencing from 9 months preceding the relevant Buyback Date and ending 6 months prior to such Buyback Date |
The period commencing from 9 months preceding the relevant Buyback Date and ending 6 months prior to such Buyback Date |
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| Buy back Amount (Rs)* |
Rs 1,000 per bond +accrued interest |
Rs 1,531.58 per bond +interest on application money compounded annually |
Rs 1,000 per bond +accrued interest |
Rs 1,549.24 per bond +interest on application money compounded annually |
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| Buy back Yield (%)*^ |
8.9% |
8.9% (compounded annually) |
9.15% |
9.15% (compounded annually) |
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* Assuming investors exercise the buyback option
^ The yield on the Tranche 1 Bonds (to be paid by the Issuer) shall not exceed the yield on government securities of corresponding residual
maturity, as reported by FIMMDA, as on the last working day of the month immediately preceding the month of the issue of the Tranche 1
Bonds.
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TAX ADJUSTED RATE OF RETURN FOR TRANCHE 1 BONDS |
| The investment up to Rs. 20,000 made will be eligible for tax benefits in the year of investment under Section
80 CCF of the Income Tax Act, 1961 (“Tax Benefits”). The table below provides Tax Benefit adjusted internal
rate of returns (pre-tax) (“TARR”) and the TARR on maturity and the TARR on buy back for the applicable
tax rates. The TARR indicates the pre tax rate of return to the investor on the initial investment, after
considering the tax benefit on the initial investment . The purpose of TARR is to provide investors with a
calculation of the rate of return on their investment in Tranche 1 Bonds up to Rs. 20,000 taking into account
the benefits of such investment as a deduction to taxable income at the relevant tax rate applicable to such
investor.
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| TAX RATE (%) |
Series I TARR** (%) |
Series II TARR** (%) |
Series III TARR** (%) |
Series IV TARR** (%) |
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| Tax Benefit adjusted rate of return on Maturity^ |
| 10.3% |
10.62% |
10.09% |
10.55% |
9.94% |
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| 20.6% |
12.64% |
11.44% |
12.21% |
10.84% |
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| 30.9% |
15.07% |
13.00% |
14.24% |
11.87% |
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| Buyback period |
| 5 years and one day from the Deemed Date of Allotment |
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| Tax Benefit adjusted rate of return on Buyback^ |
| 10.3% |
11.7% |
11.29% |
12.01% |
11.55% |
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| 20.6% |
15.05% |
14.04% |
15.35% |
14.30% |
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| 30.9% |
19.01% |
17.26% |
19.33% |
17.52% |
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| ^with Tax Benefits up to Rs. 20,000 u/s 80 CCF of the IT Act, 1961; ** TARR= Tax adjusted rate of return |
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Investors to benefit from 80 CCF Benefits: |
- The Bonds are classified as “long term infrastructure bonds” and are being issued in terms of section 80 CCF of the Income Tax Act.
- Bonds offer an additional window of tax deduction of investments of up to Rs 20,000.
- The deduction is over and above the Rs 1,00,000 deduction available under section 80C, 80CCC & 80CCD read with section 80CCE.
- It helps in intermediating the retail investor’s savings into infrastructure sector directly.
- In the event that any applicant applies for the bonds in excess of Rs 20,000 p.a., the afore stated tax benefit shall be available to such applicant only to the extent of Rs 20,000 p.a.
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