Thursday, February 24, 2011

PFC Long Term Infrastructure Bond 2010-2011

PFC 80CCF Bonds for this year can be referred here! The below text is for last year's bond.

Overview:
Companies are competing to offer Long Term Infrastructure Bond as the financial year comes to close on 31st March, 2011. After L&T, IDFC, IIFCL - Power Finance Corporation (PFC) is coming out with a long term infrastructure bond which will help in saving tax as well to the tune of Rs 20000 under Section 80CCF of the income tax act, 1961. This is over and above the tax saving limit of Rs 1 Lac under Section 80C, 80CCC and Section 80CCD.

PFC intends to raise up-to Rs 5300 crore and may be issued in one or two tranches. The face value of the bond will be Rs 5000.

Date:
The bond issue will open for public subscription on February 24 and will close on March 22, 2011.

Interest Rate and Options:
The rate of interest for 10 year tenure, annual and cumulative, is 8.3% and for 15 year tenure, annual plus cumulative is 8.5% with a lock in period of 5 years. That means investors have the choice to buy back, they can offer it back to PFC after 5 years.

Rating:
The bonds will be issued in both physical and Demat format, and the issue has been rated AAA by CRISIL and AAA by CARE, which indicates their highest safety rating.

Recommendation:
A similar bond issue from India Infrastructure Finance Company Ltd (IIFCL) is also now open till March 4. It offers 8.15 per cent for 10 years and 8.3 per cent for 15 years. The 2nd tranche offering of L&T is also offering lower interest than PFC. So, if one is looking at saving tax on Rs 20000 over and above Rs 1 Lac, the interest offered by PFC seems to be the best offering by any infrastructure company for this year. So, would highly recommend it for such investors. This may also be the last such offering for this financial year.