Tuesday, March 5, 2013

IRFC Tax Free Bonds 2012-2013

Indian Railway Finance Corporation (IRFC), a Government of India undertaking, has come out with Rs 8886.4 crore public issue of tax free secured redeemable non-convertible bonds. The issue size is Rs 1000 crore with an option to retain over-subscription up-to Rs 8886.4 crore. For those individuals who are in the highest tax bracket, this is a good source of tax free secured interest income. Last year the interest rates on tax free bonds offered were higher but this issue is still good for those in highest tax bracket as the interest rates have come down and are expected to come down even more. 

Opening and Closing dates:

First Tranche: The issue shall open on 21 January, 2013 and shall close on 29 January, 2013. The close date has been extended to 8 February, 2013. 
Second Tranche: The issue shall open on 25 February, 2013 and shall close on 13 March, 2013.

Face Value:

The face value is Rs 1000 per bond and the minimum application for subscription in retail segment is Rs 5,000 with maximum at Rs 10 Lakhs in increment of Rs 1000.

Available options:

Interest rates for first tranche:
Interest Rate %
HNI / Corporate
10 yr
15 yr

Interest rates for second tranche:
Interest Rate %
HNI / Corporate
10 yr
15 yr

Those investing up-to Rs 10 lakhs are retail investors and above that are High Net-worth Investors (HNIs) for the purpose of this issue. These bonds carry a step-down clause - the coupon gets reduced by 50 basis points for retail investors once the bonds get listed or the ownership of bonds changes hands. Interest would be paid annually for all categories.

CRISIL, CARE and ICRA has rated AAA to the bonds, indicating high degree of safety regarding timely servicing of financial obligations. These bonds would be listed and tradable on NSE and BSE. No tax would be deducted at source on income and the allotments would be on first come first serve basis.

The issue can be subscribed in DMAT as well as physical form.

HUDCO is offering the highest interest rate compared to all the companies that has come out with tax free bond issues this year.


IRFC bonds got subscribed 5.38 times at the close of the issue of first tranche. 


Click here to check for IRFC Tax Free Bonds allotment status!
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  1. Thanks for this useful information. My question is where can I get more details on this railway bond and how much is lock in period for this. I want to compare this one with the other tax free bonds that are available, is there any such comparison available so that one can make quick reference. How much is safe limit to invest in these types of bonds - any suggestions?

  2. These bonds can be sold and bought on the secondary market after listing so there is no lock in period as these bonds would be listed.

    As I mentioned previously, HUDCO offers the best interest rate among all tax free bonds so far, so that issue was the best.

    These bonds are very safe as they are offered by PSU.

    Let me know if you hav