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9% Risk Free Returns is as Good as it Gets – Buy NHPC,REC, HUDCO and other Tax Free Bonds being Sold these days

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Tax Free Bonds

The primary equity market in India is pretty much dead, despite the stock market indices touching new all time highs. The reason is that the Sensex and Nifty are being driven by a few sectors which are seeing sky high valuation, while the rest of the economy continues to remain in the doldrums. You would expect a spate of IPOs with the indices at new highs, but this has not been the case. The reason is that the sentiment remains extremely low and retail investors have completely abandoned the stock market after being burned a number of times. This rally also seems hollow and the reason for the rise is the global risk due to continued Fed money printing.

Some good news for the investors is that theĀ Indian government owned companies are coming out with tax free bonds with high yields. NHPC and PFC recently came out with bonds where they are giving ~9% interest rate for 20 years. This is pretty awesome in my view, as 9% is a great return especially if you don’t have to worry about tax. The only catch is that liquidity is going to be a big problem, as the bond market in India is not developed and hardly any bond trading takes place in NSE and BSE. So even though these bonds will be listed, it will be hard to sell them. But not a big problem as you can continue to get a high yield for 20 years. So if you have spare cash, then invest some of it in these bonds. 9% is nothing to sneeze at, considering that these bonds have a quasi government guarantee as well. 9% risk fee is as good as it gets.

Read more at NSE India website.

Series

S1 – 8.18% – 10 years for Category I, II & III

S2 – 8.54% – 15 years for Category I, II & III

S3 – 8.67% – 20 years for Category I, II & III

S4 – 8.43% – 10 years for Category IV

S5 – 8.79% – 15 years for Category IV

S6 – 8.92% – 20 years for Category IV

Issue Period

18-Oct-2013 to 23-Oct-2013

Post issue Modification Period

24-Oct-2013

Issue Size

Rs. 500 crore with an option to retain oversubscription up to Rs. 500 crore aggregating to Rs. 1000 crore.

Security Type

Tax Free Secured Redeemable Non-Convertible Bonds

Price

Rs 1000

Face Value

Rs 1000

Market Lot

1 NCD

Minimum Application Value

5 (five) NCDs (Rs. 5000) either taken individually or collectively

IPO Grading

AAA by ICRA, IND AAA by IRRPL and AAA by CARE

PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in

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