Larsen & Toubro (L&T) Infrastructure Finance Company has declared to float its second tranche of bonds for the year 2011-12. These are tax saving infrastructure bonds under section 80 CCF. The company expects to raise Rs 570 crore through these Tranche 2 issue of infrastructure bonds. The company has been authorised to raise total Rs 1,100 crore from these bonds during the current fiscal. The bonds will be available in market upto 11th February 2012. The benefit under section 80 CCF is limited to Rs 20,000 in a financial year, but there is no limit on investment.
These Tranche 2 Bonds will carry a minimum lock-in period of 5 years from the date of allotment. They can also be redeemed after 10 years from the effective date of allotment.
Bonds Summary :-
Issue Opens : 10th January 2012
Issue Closes : 11th February 2012
Face Value : Rs 1000 per bond
Subscription Amount : Minimum 5 bonds
Interest Rate : 8.70% per annum
Mode of holding : Demat or Physical
Credit Rating : “AA+” From ICRA and CARE
Term of Maturity : 10 years
Lock in period : 5 years from date of allotment
Listing : These bonds will list on BSE after lock in period
Investors with a demat account can purchase the bonds in dematerialised form and trade after the minimum lock-in period, which is 5 years. There are three exit options available for investors in these bonds.
The first one is at end of 5 years, the second at the end of 7 years and the third after 10 years which is at the time of redemption. Investors who don’t have a demat account can opt for the bonds in physical form.
There are two variants in these tax saver bonds. Under the first variant, interest rate is 8.70% payable annually and in the case of Series 1 2, the interest rate is 8.70% compounded annually payable at the end of maturity or buyback. The maturity is 10 years from the deemed date of allotment.
The Tranche 2 Bonds have been rated ‘CARE AA+’ by CARE and ‘[ICRA] AA+’ by ICRA.
Should you invest?
It definitely makes sense to invest in these bonds, if you have not yet invested in infrastructure bonds. These bonds are priced lower than the earlier bond issuances reflecting a possibility of rate cut in the near future.
If there is no liquidity pressure, you should opt for the cumulative option for a maximum period of 10 years, under which the interest rate is compounded annually.
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