National Housing Board Tax Free Bonds – March 7, 2014 to March 18, 2014

NHB has joined the bandwagon with its tax free bonds.  The issue is open for subscription till March 18, 2014 with best available interest rates amongst other live issues.  While IRFC is facing problem with attracting investors forcing it to extent the closing date to March 14, 2014, NHB is providing short window of 12 days for subscription.

Key Features of Bond Issue:

For other details about the issue as well as risk factors, kindly go through the Prospectus before investing.

Comparison

Out of all the current bond issues live for subscription, NHB provides the best interest rates and hence should be the first choice of investment for individuals looking for investment in tax free bonds.  However, one should invest immediately and should not wait till the closing date since the issue is on first cum first serve basis and the issue size is small.

Interest rates on small savings schemes for financial year 2014-2015

Government has announced interest rates on small savings schemes for financial year 2014-2015.  This is in line with recommendations of Shyamala Gopinath Committee for Comprehensive Review of National Small Savings Fund.

Interest Rates on small savings schemes

While interest rates for most of the instrument types have remained unchanged, rates on post office time deposits have been revised upwards by 10 bps to 20 bps (100 bps is equivalent to 1 percentage point.).  Public Provident Fund remains one of the best option for long term secured investment.

Update: Withdrawal of bank notes issued prior to 2005 extended till January 1, 2015

Subsequent to its advisory dated January 22, 2014 and as noted in our earlier post, RBI has extended the date for exchanging pre-2005 bank notes from March 31, 2014 to January 1, 2015. RBI has also clarified that public can continue to freely use these notes for any transaction as such notes continue to remain legal tender.

Exchange of notes - experience

While there has been minor hiccups while exchanging the notes with banks,carrying the printout of RBI's press release shall be handy at the time of exchange of notes.  Though the release says that there is no need to provide any details of depositor nor to have banking account with the bank where one is exchanging the pre-2005 notes, few banks are refusing to exchange the money and mandating to deposit the same in the account.

Where you able to exchange pre-2005 bank notes without any hassle?  Did your bank refuse to exchange the notes and mandated you to deposit the money in your account?  Kindly share your experiences in the comment section below.

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.