3 Tax-free bonds and SME issue lined up this week

While primary market is still waiting for a main line IPO, tax free bonds and SME IPO continues to make a beeline.

Public sector undertaking Indian Railway Finance Corporation Ltd. (IRFCL) is coming out with its Tranche II Tax Free bonds issue offer that is opening for subscription on 28.02.14. Details of the offer are as under:

3 Tax-free bonds and SME issue lined up this week

IRFCL is offering bonds of face value of Rs. 1000 each and minimum application is to be made for 5 bonds and then in multiple of 1 bond thereafter. The issue that opens on 28.02.14 is set to close on or before 07.03.14. An investor can apply for the same in demat as well as in physical mode, however the trading will take place in demat mode only. The base size of the offer is Rs. 1500 crore and the company has permission to retain oversubscription to the tune of Rs. 1416.88 crore, taking the overall size of the issue to Rs. 2916.88 crore.

These bonds carries ratings as CRISILAAA/Stable’ by CRISIL ; ‘[ICRA] AAA’ by ICRA and ;‘CARE AAA’ by CARE indicating at highest degree of safety regarding timely servicing of financial obligations. These will be listed on BSE and NSE post allotment.

These bonds are having coupon rate ranging from 8.19% to 8.88% depending on the category as well as on tenure of the bonds.

Category I,II and II  (all non-retail) are offered 8.19% for 10 yrs and 8.63% for 15 yrs while retail investors under Category IV are offered 8.44% for 10 yrs and 8.88% for 15 yrs.

This issue is lead managed by SBI Capital Markets Ltd, A K Capital Services Ltd, Axis Capital Ltd, ICICI Securities Ltd, Kotak Mahindra Capital Co. Ltd.  Karvy Computershare Pvt Ltd is the registrar to the issue and SBICAP Trustee Co. Ltd is the trustee to the bondholders.

Remarks: Apply

Rural Electrification Corporation Ltd. (REC) is again coming out with a tax free bonds offer under Tranche II. REC is offering each bond of Rs. 1000 face value bearing coupon rates ranging from 8.19% to 8.88% based on category and the tenure. The base size of this offer is Rs. 250 crore with an option to retain over subscription up to Rs. 809.40 crore, taking the total offer size at Rs. 1059.40 crore. Minimum application is to be made for 5 bonds and in multiple of 1 bond thereof, thereafter. These bonds are available under demat and physical mode, but trading will take place in demat mode only.   For category I,II and III (Non-Retail) the coupon rates are 8.19% for 10 yrs, 8.63% for 15 yrs and 8.61% for 20 yrs while for Retail category the coupon rates are 8.44% for 10 yrs, 8.88% for 15 yrs and 8.86% for 20 yrs. The issue opens for subscription on 28.02.14 and will close on or before 14.03.14. These bonds will be listed on BSE post allotment.

Remarks: Apply.

Housing & Urban Development Corporation Ltd. (HUDCO) is again coming out with a tax free bonds offer under Tranche III.

HUDCO is offering each bond of Rs. 1000 face value bearing coupon rates ranging from 8.29% to 8.98% based on category and the tenure. The base size of this offer is Rs. 75 crore with an option to retain over subscription up to the residual shelf limit of Rs. 285.81 crore. Minimum application is to be made for 5 bonds and in multiple of 1 bond thereof, thereafter. These bonds are available under demat and physical mode, but trading will take place in demat mode only.

These bonds are rated ‘CARE AA+’ by CARE and ‘IND AA+’ by IRRPL indicating highest degree of safety regarding timely servicing of financial obligations and carry very low credit risk. For category I,II and III (Non-Retail) the coupon rates are 8.29% for 10 yrs, 8.73% for 15 yrs and 8.71% for 20 yrs while for Retail category the coupon rates are 8.54% for 10 yrs, 8.98% for 15 yrs and 8.96% for 20 yrs. The issue opens for subscription on 28.02.14 and will close on or before 19.03.14.  These bonds will be listed on BSE post allotment.

Remarks: Apply moderately.

Anisha Impex Ltd. (AIL) is currently engaged in the business of trading of fabrics. It is a multi-product fabric trading company and range includes fabrics for bedding, windows dressing, decorative, pillows and accents, table linen, kitchen linen and other home furnishing fabrics.

To meet its long term working capital requirements, the company is coming out with an IPO for 6500000 equity share of Rs. 10 each at par to mobilize Rs. 6.50 crore. The issue is opening on 03.03.14 and will close on 05.03.14. Minimum application is to be made for 10000 shares and in multiples, thereafter.  Shares will be listed on BSE SME.

On the performance front, the company has posted an average EPS of Rs. 5.57 for last three fiscals on an equity base of Rs. 0.22 crore. For first nine months of the current fiscal ended on 31.12.13, it has earned net profit of Rs. 0.07 crore on a turnover of Rs. 21.57 crore giving an annualized EPS of Rs. 0.09 on equity of Rs. 9.93 crore that will translate into an EPS of Rs. 0.05 on enhanced equity post this issue. It results in asking price at a P/E of 200 even at par face value.

The issue is lead managed by Inventure Merchant Banker Services Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue. Merchant bankers have a poor track record. Due to at par issue, post listing, this issue might surprise all with erratic trades, but considering the performance so far, issue is not worth.

Remark: Avoid it as it has entry barrier as well as poor performance.

Dilip Davda

(Email: dilip_davda@rediffmail.com)

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