Sunday, November 25, 2012

Top Infrastructure Bonds

Following are the best infra bonds in India:
  • IDFC Infrastructure Bonds
  • L&T Infrastructure Bonds
  • IDBI Flexibonds
  • IIFCL Long Term Infrastructure Bonds
  • IFCI Infrastructure Bonds
  • ICICI Safety Bonds
  • REC Tax Saving Infrastructure Bonds
Right now, IFCI is providing the best in terms of interest rates with 9.09% for its 10 years bonds and 9.16% for the 15 year infra bonds. REC investors can expect a rate of 8.95% for the 10 year bonds, PTC India Financial investors will receive 8.93% for the same bonds, and for the SREI Infra Finance investors the rate is 8.90%. The rate for 15 year bonds for the three companies is 9.15%. 

REC enjoys a credit rating of AAA, which implies that it offers the most security for its investors especially in factors such as timely repayment of principal and interest. Following are the ratings details of some other infra bond issuing organizations: 

  • IFCI - AA- (from Brickwork Ratings), CARE A+ (from CARE), LA (from ICRA)
  • PTC India Financial Services - A+ (from both CARE and ICRA)
  • SREI - AA (from CARE)
Experts think that investors get the maximum security from REC and IFCI as they are government owned. 

IDFC Infra Bonds 

  • Interest rate - 8.70%
  • Eligible for maximum tax benefit of INR 20,000
  • AAA rating by ICRA and Fitch
  • Lock in period - 5 years
  • Can be sold at both NSE and BSE after lock in period
How to choose infra bonds 
At the least, an investor needs to compare the returns being provided by various companies issuing the infrastructure bonds and check out their credit rating. Experts opine that an investor should also keep in mind the latest financial performance of a company before buying its investment instruments. 

How to invest in infra bonds
Investors looking to make the most of their money in infra bonds are often asked to put 50% of the deductible money in the 10 year bonds and the rest in the 15 year bonds. But experts opine that since 20,000 is a small amount it is better to not split it as it may not be tracked properly. 

From the 2012-13 fiscal onwards the infrastructure bonds will not provide tax benefits. The tax benefit had been extended till 2011-12 and experts had asked that the tax exemption limit be increased. 
However, the Union Finance Ministry did not touch upon the infra bonds in the latest bonds and opted to completely do away with the tax benefits being granted previously. 

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