IIFCL and Ennore Port Limited Tax Free Bond Issue - Comparison

Alongwith IREDA tax free bonds, IIFCL’s and Ennore Port Limited’s (EPL) tax free bond issue is also open for subscription this week.  While IIFCL issue opens on 17^th Feb 2014, EPL issue is schedule to open on 18^th Feb 2014.  Including IREDA, investors have 3 options to invest in tax free bond issues giving attractive interest rates.

Read about IREDA Tax Free Bond Issue here

Key Features of Bond Issues:

	IIFCL	EPL
Issue Size	Rs. 750 crores with option to retain oversubscription till Rs. 2,823 crores	Rs. 250 crores with option to retain oversubscription till Rs. 500 crores
Issue open & close date	17th Feb 2014 and 14th Mar 2014.  Allotment on first come first serve basis.	18th Feb 2014 and 14th Mar 2014.  Allotment on first come first serve basis.
Minimum investment	5 bonds of Rs. 1,000 FV (i.e. Rs. 5,000)
Secured	Yes. Ranked paripassu with the claims of other secured creditors.
Listed on	BSE
Mode of Allotment	Demat as well as Physical.  However, trading can take place in demat form only.
Credit Rating	Care AAA by Care (indicating lowest credit risk and highest safety)	Care AA by Care (indicating low credit risk and high safety)
Interest Payment	Annual

Issue structure and interest rates for retail investors:

Tenor (in years)	Series	Coupon Rate (%) p.a.
		IIFCL	EPL
10	Series 1B	8.41%	8.61%
15	Series 2B	8.80%	9.00%
20	Series 3B	8.80%	9.00%

For other details about the issue as well as risk factors, kindly go through the prospectus of IIFCL and EPL before investing.

Read about who should invest in tax free bonds here.

Comparison between IREDA, IIFCL and EPL

EPL provides slightly higher interest rates as compared to both IREDA and IIFCL which offers same interest rates.  However, the credit rating of EPL is lower than IREDA and IIFCL.  Further EPL’s issue is smaller in size as compared to other two.  Since 20 basis point additional interest for 15 years and 20 years tenure do not make any significant difference to the overall returns, it is advisable to stick to more secured issues of IREDA and IIFCL.

IREDA Tax Free Bonds Issue - 17th Feb 2014 to 10th March 2014

Post rate hike by RBI on 28th Jan, 2014, IREDA (which stands for Indian Renewable Energy Development Agency Limited) is the first company to come out with the tax free bond issue at an attractive interest rates.  In this post, we shall highlight key features of the bond issue:

Key Features of Bond Issue:

Issue Size	Total Rs. 1,000 crore including green shoe option
Issue open & close date	17th Feb 2014 and 10th Mar 2014.  Allotment on first come first serve basis.
Minimum investment	5 bonds of Rs. 1,000 FV (i.e. Rs. 5,000)
Secured	Yes. MNRE (which is Ministry of New and Renewable Energy) has given letter of comfort on behalf of IREDA for its payment obligations w.r.t. tax free bonds
Listed on	NSE and BSE
Mode of Allotment	Demat as well as Physical.  However, trading can take place in demat form only.
Credit Rating	Care AAA by Care (indicating lowest credit risk and highest safety)
Interest Payment	Annual

Issue structure and interest rates for retail investors:

Tranche – I SERIES	Coupon Rate (%) p.a.	Tenor (in years)
Series IB	8.41%	10
Series IIB	8.80%	15
Series IIIB	8.80%	20

For other details about the issue as well as risk factors, kindly go through the Prospectus before investing.  And do not forget to read who should invest in tax free bonds before investing in IREDA tax free bond issue.

Tax planning and months of February and March

Sanjana and Sanjay were out on a stroll early wintry Thursday morning of February in Mumbai, which generally is a rarity for this city.

“What a pleasant weather today is!” Sanjana noticed and asked, “Let’s go outdoors during the weekend and enjoy the nature. What say, Sanjay?

“It’s a good idea and weather is also perfect for a day’s outing. But I have some important personal work to do and shall not be able to join you.” Sanjay replied.

“Oh! You and your so called important personal work!” Sanjana exclaimed, “You always have your excuses ready for everything!”

“No Sanjana”, Sanjay replied in a bit serious mood, “it’s already February and I need to do my tax related investments and planning for the year.  I need to submit the documents to my employer in next few days.

“I don't get any time to do this during weekdays and need to complete it during the coming weekend.  We shall plan for outing some other day, Sanjana.”

“You are not yet through with your tax related investments, Sanjay?” Sanjana quizzed, “I never expected you to be lazy in such matters.”

Irked by Sanjana’s question, Sanjay responded “Now where laziness comes in this? Last quarter of the year is meant for tax related investments and planning and I am bang on time.  Only issue is it is not possible for me to do it during weekdays and hence I am doing it during my off time.”

“That’s the problem with all you guys.” visibly upset Sanjana said, “You start your tax planning activities in the month of February or worst in March.  You wait till the end of the year and then start lamenting about it!”

Clueless Sanjay questioned, “Can you please elaborate on this?”

“I don’t want to ruin your pleasant Thursday morning.” Sanjana replied, “But still it is important for you and all others who start their tax related activities late to understand.

“Tax planning should not get started during the end of the year, but should be carried out right at the outset of the year.  By this what I mean is it should be carried out in the months of April or May.”

Still not convinced, Sanjay ask her to explain this further.

“Listen, whatever activities you are planning to do right now - like investments in PPF or tax savings mutual funds, insurance premium, etc - can take place anytime.

“Infact I do all these things in the month of April itself so I need not worry about my tax investments in the month of February or March.   Now all I need to do is take a print out and submit the proof to my employer.  That’s all!”

“That’s all?” Sanjay said, “How is this possible?  If there is a way to do all this earlier during the year, I am all ears.  Tell me how I can do that.”

“It’s simple.” Sanjana started explaining, “All you need to do is plan and start early.  Let’s say you are planning to invest Rs. 1 lac in PPF during the year.  All you need to do is give your bank standing instructions to transfer Rs. 10,000 p.m. from your savings account to your PPF account.  Similarly for mutual fund investment, you can start a SIP and invest during the year in ELSS scheme.  You can structure all your investments in a similar fashion.”

“This is interesting and very much practical.  I never thought about it in this way.” said Sanjay.

“As regards home loan and interest deductions, EMI on home loan is paid monthly so you need not do anything about it.  Same applies in case you pay rent periodically to your landlord.  You can also plan purchasing your insurance policies such that the premium is due early during the year so that is also taken care of.  Have I missed out anything?” asked Sanjana.

“You have covered almost everything.  For things like medical bills, etc. these gets accumulated during the year as and when the expense incurs.  All I need to do is keep record of these things and bingo I am free for you during the weekend for outing!” exclaimed Sanjay.

“Yes” said pleased Sanjana, “This is not only the most effective way, but also helps you to plan your investments quite early during the year.  This time I absolve you from the outing but next year I don’t want you to blubber about the same thing again!” winked Sanjana.

How are you planning your tax investments?  Do share your experiences and thoughts with other readers in the comment section.

Cheapest Term Insurance Plan

In our analysis of top life insurance companies based on claim processing efficiency, we shortlisted 4 insurance companies, viz, LIC, HDFC Life, ICICI Prudential and SBI Life which has the most efficient claim processing mechanism and where the probability of your claim getting settled and paid quickly is more than for other insurance companies.

In this post, we shall compare premium amount for term insurance policies from these companies and check which one out of the four is the cheapest.

Premium Amount

Tabulated below is the premium of term insurance policy for sum assured of Rs. 1 crore with term of 30 years for an individual aged 30 years:

Insurance Company	Plan Name	Premium Amount
LIC	Amulya Jeevan – II	23,300
HDFC Life	Click2Protect	10,600
ICICI Prudential	iCare Term Plan	13,800
SBI Life	E Shield	11,690

Note: Premium amount is in rupees and excluding taxes.

Based on the above it can be seen that HDFC Life’s Click2Protect term plan is the cheapest term plan available, followed by SBI LIFE E-shield.

However, HDFC Life’s Click2Protect term plan do not have an option for accidental death benefits which is available with plans of other companies at an additional premium. Further the premium amount may vary differently amongst various policies depending on the term period and age of an individual and the above ranking may not hold true.

Also note that HDFC Life’s Click2Protect plan is cheapest amongst the four insurance companies which we have shortlisted.  It may not be cheapest amongst all the insurance companies.  For eg:  Similar term plan from Aegon Religare is available for Rs. 5,800/-.

Conclusion

Based on our analysis in this as well as previous post, we can conclude that HDFC Life’s claim processing is most efficient and it has one of the cheapest term insurance plan.