Sunday, October 17, 2010

L&T Infra Long-term Infrastructure Bonds

Analysis:
L&T Infra has launched long-term infrastructure bond. L&T Infra is part of the L&T Group. With this new bond issue they are planning to raise over Rs. 7 Billion. These bonds will be listed in the NSE. This issue is open for public, residential individuals and HUF. This issue is open from October 15, 2010 and will close on November 2, 2010. These bonds can be held either in demat or physical form as per the applicant’s wish.

It comes with tax saving option for the investment of up Rs. 20,000 under section 80 CCF after the recent announcement in the budget. The money invested on this L and T Infrastructure Bond will grow at a rate of 7.5% to 7.75% p.a. apart from helping you save tax. This L&T Infra Tax Saving Bonds 2010A Series comes with the option of buy back after 5 years of minimum lock-in period but the actual maturity date of this bond is 10 years.

This L&T Long-Term Infrastructure bond is rated as AA+ by CARE and is rated as LAA+ by ICRA, two of the leading credit rating companies in India. It means these bonds are with high credit quality and low credit risk.

These bonds from Larsen and Toubro Infra comes minimum face value of Rs. 1000 and multiples of the same. The minimum application is 5 bonds. There will be no TDS for the bods issued via the demat route but there will be TDS if the same brought via the physical form.

Recommendation:
After a series of IPOs, it is time for Bonds - IDFC, SBI and now L&T. These are offering much better option than Bank fixed deposits. Not sure why anyone would want to go in for bank fixed deposits now as they are offering lower interest rate. Infact even lot of company fixed deposits are offering just about similar interest rates as these Bond issues. So, definitely worth serious consideration by investors. Investors could look at balancing their portfolio with safe debt instrument like Bonds especially since they are offering very good interest rates. However, we would recommend IDFC Bond to investors as it is offering 0.25% more to investors.

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