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Rural Electrification Corporation Limited

Rural Electrification Corporation Limited. Tax Free Bond Issue. February 2012. MARCH 2012 ISSUE. Rural Electrification Corporation Limited. About the company. Objectives.

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Rural Electrification Corporation Limited

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  1. Rural Electrification Corporation Limited Tax Free Bond Issue February 2012

  2. MARCH 2012 ISSUE

  3. Rural Electrification Corporation Limited About the company Objectives • To promote and finance projects in power generation, distribution promotion of decentralized and non-conventional energy sources • Implementation of Rajiv Gandhi GraminVidyutikaranYojana • To expand and diversify into other related areas and activities like financing of decentralized power generation projects, use of new and renewable energy sources, consultancy services etc. • To mobilize funds from various sources • To assist loanees by providing technical guidance, consultancy services and training facilities REC is a Navratna Central Public Sector Enterprise under Ministry of Power. It is incorporated under the Companies Act, 1956, is listed and has a net worth of Rs. 12,789 Crore as on 31.03.11. Its main objective is to finance and promote rural electrification projects all over the country. It provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them. The company disbursed Rs. 28,517 Crores and had a total income of Rs. 8,495 Crores in FY 2011. The company had a PAT of Rs. 2,570 Crores in FY 2011. • Achievements • Consistently rated as 'Excellent'- the highest category - by Govt. of India since 1993-94. • Received 'MOU' Award from the Government of India five times, for 'Excellence in performance' • Cumulative sanctions & disbursements stand at Rs. 2,60,000 Cr.& 1,30,000 Cr. respectively. • Received 'MOU' Award from the Government of India five times, for 'Excellence in performance'

  4. Tax free Bonds Relevant Extracts of Section 10(15)(iv)(h) of Income Tax Act,1961: “Section 10 . INCOMES NOT INCLUDED IN TOTAL INCOME. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included – 15 (iv) Interest payable - … …(h) By any public sector company in respect of such bonds or debentures and subject to such conditions, including the condition that the holder of such bonds or debentures registers his name and the holding with that company, as the Central Government may, by notification in the Official Gazette, specify in this behalf” Features Advantages • The interest income on the bonds is not taxable/exempt. • Tenure: Choice of 10 years and 15 years • Proposed to be listed on NSE and BSE • No lock-in period * • Secured issue • In demat form only • PAN is Mandatory • The Interest income on the bonds is tax free • No cap on amount of investment eligible for tax benefits • No lock-in period* • Bonds will be listed on NSE and BSE * For exact details, please refer Shelf prospectus dated February 21, 2012 for REC and Tranche Prospectus, filed with the stock exchange(s) from time to time.

  5. Coupon and Pre Tax Yields • Current 10 year G-Sec Yield*: 8.19 % semi annual or 8.35 % annual • Therefore, the coupon at an upper cap arrive to • 7.85 % for Public Issue • The interest on these bonds are tax free, and offers an effective yield** of • Individuals and HUF: Up to 11.36 % p.a. • Up to 11.62 % - for a domestic corporate entities Please note however the rates above are caps and the company may fix the rates lower than the cap shown above Recent issues of similar bonds • Effective yield on tax free bonds is higher than other tax free instruments. Indicative rate of return of the recent issues in FY2011-12 are given in the table below: • The Public issue of NHAI and PFC Opened in the last week of December 2011 and received huge response from institutional investors, Corporate, HNIs and NRIs. • Both the issues were oversubscribed on the first day itself. * G Sec yields as on 21st February 2011, if the issue opens in March, the reference rate of 29th March 2012 will be taken. ** The effective yield considers surcharge and cess, as applicable Note: The above rates are mere illustration and the actual coupon shall be decided at the time of opening of the Issue.

  6. Retail Benchmarks *Post tax return at tax bracket of 30%. The effect of Section 80C deduction is not taken in calculation of post tax returns. ** Data represent category average picked up from valueresearchonline.com The above data has been extracted on 21st February 2012 from respective websites of the issuers and other information available in news.

  7. Who can apply? Category I - QIB Category I Qualified Institutional Buyers (“QIBs”) as listed out below: • Mutual Fund, • Public Financial Institution as defined in section 4A of the Companies Act, 1956; • Scheduled Commercial Bank; • Multilateral and Bilateral Development Financial Institution; • State Industrial Development Corporation; • Insurance Company registered with the Insurance Regulatory and Development Authority; • Provident Fund with minimum corpus of twenty five crore rupees; • Pension Fund with minimum corpus of twenty five crore rupees; • National Investment Fund set up by resolution no. F. No. 2/3/2005- DDII dated November 23, 2005 of the Government of India published in the Gazette of India; • Insurance Funds set up and managed by army, navy or air force of the Union of India • Insurance Funds set up and managed by the Department of Posts, India • Regional Rural Banks and Co-operative Banks, eligible to invest in the Issue; • Companies; bodies corporate and societies registered under the applicable laws in India and authorised to invest in the Bonds; • Public/private charitable/religious trusts which are authorised to invest in the Bonds; • Scientific and/or industrial research organisations, which are authorised to invest in the Bonds; • Partnership firms in the name of the partners; • Limited liability partnerships formed and registered under the provisions of the Limited Liability Partnership Act, 2008 (No. 6 of 2009) Category II The following investors applying for an amount aggregating to above Rs. 1 lakh across all Series in the Issue: • Resident Indian individuals; • Hindu Undivided Families through the Karta; Category III The following investors applying for an amount aggregating to up to and including Rs. 1 lakh across all Series in the Issue: • Resident Indian individuals; • Hindu Undivided Families through the Karta

  8. Terms of the Issue* *Based on Information given in Shelf prospectus dated February 21st, 2012 and tranche prospectus filed with the exchange from time to time.

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