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Buyers cool to infra bonds

The government’s attempt to attract the retail investor to fill the funding-gap in the infrastructure sector seems to missing the fizz, going by the market response to infrastructure bonds. Sachin Kumar reports.

business Updated: Feb 28, 2011 00:23 IST
Sachin Kumar

The government’s attempt to attract the retail investor to fill the funding-gap in the infrastructure sector seems to missing the fizz, going by the market response to infrastructure bonds.

Infrastructure Development Finance Company (IDFC), L&T Infrastructure Finance and India Infrastructure Finance Company (IIFCL) have not been able to raise even half the target amount till now. The companies, however term the response good, as these are a new product category.

IDFC aimed to raise around R3,400 crore in 2010-11 in multiple phases, but has been able to raise only around R 1,228 crore in two tranches. The company has now launched a third and final tranche to try and bridge the R2,717-crore gap. http://www.hindustantimes.com/Images/HTEditImages/Images/28_02_11_business23b.jpg

“The response should be seen in the context that infrastructure bonds are new for the retail investors,” says Tapasije Mishra, managing director and group chief executive officer, IDFC Capital. “There is need to make investors aware of these bonds as this is the first year of their launch in the country,” he adds.

The government had in last year’s budget allowed a deduction of up to R20,000 on investments in long-term infrastructure bonds. This is in addition to the R100,000 allowed under section 80C of the Income Tax Act. The bonds are offering interest in the range of 8.1% to 8.25%.

L&T Infra Fin, a fully-owned unit of engineering conglomerate Larsen & Toubro, set a target of Rs 700 crore in the current fiscal, but managed to raise only around R256 crore in the first tranche in November 2010. The second tranche of the issue is open till March 7.

“We are expecting good response this time as our timing of launch is right,” says Suneet Maheshwari, chief executive officer, L&T Infrastructure Finance. He refused to reveal how much the second tranche of the offer has raised.

IIFCL had set a target of Rs 1,200 crore but has been able to raise around Rs 30 crore at the end of February 24. The issue will close on March 4.