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REC Tax free bonds

REC 8.71% Tax-Free Bonds Issue – August 2013: The Bond to Bond With

by Holistic Leave a Comment | Filed Under: Investments

The current environment in the Indian financial market can perhaps be termed cataclysmic. The stock indexes have made losing a habit and the Rupee is headed for the Marina Trench. Investors are in a gloomy mood and are desperate to latch on to options which can keep them buoyant in troubled waters.

Every cloud has a silver lining and the unruly waves also throw up a crest after a trough. Tax Free Bonds from Rural Electrification Corporation (REC) is such a feel-good news which is sure to put some enthusiasm back in investors. The bond is poised to make its public appearance on 30th August 2013 and the interest rates on offer for the 10 year, 15 year and 20 year terms are 8.26%, 8.71%, and 8.62% respectively for the term periods. These are healthier by 0.70% to 1.50% when compared to the rates on offer last year.

So what are the salient features of the REC bonds?

Well, REC plans to raise Rs. 3500 crores from the market which is inclusive of the green-shoe option of Rs.2,500 crore. What’s more, the issue is expected to be oversubscribed and hence will perhaps be closed before its schedule closing date of 23rd September 2013. As per the terms of the CBDT notification , REC can raise 70% of the total amount through public issue meaning that the total amount allowed by the government, to be raised is Rs. 5000 crores.

The balance amount will in all probability be raised through private placements.

Let us have a look at the salient features of the issue:

Who can invest?

  • Non-resident Indians (NRIs), Qualified Foreign Investors (QFIs), Retail Individual Investors, Hindu Undivided Families (HUFs) through their Kartas can all invest in these bonds.

Four categories of investors can invest in the issue:

  • Qualified Institutional Bidders (QIBs) – 20% of the issue reserved
  • Non-institutional Investors (NIIs) – 20% of the issue reserved
  • High Net Worth Individuals including HUFs, NRIs & QFIs – 20% of the issue reserved
  • Retail Individual Investors including HUFs, NRIs & QFIs – 40% of the issue reserved

What will be the interest payment and record date?

  • Investors are keen to know this beforehand so that they can plan accordingly. For this issue the interest payment date will be December 1 and the record date will precede this by 15 days.

Whether there is a cumulative option?

  • There is no cumulative option. Interest is payable annually.

What is the safety rating and the nature of the bond?

  • CRISIL, CARE, India Ratings and ICRA rate the bond highly at ‘AAA’. REC, being a ‘Navaratna’ PSU offers a secure and safe investment option through these bonds. The bonds are also further secured by certain assets of the company.

How long will it take to get these bonds listed on the stock exchange?

  • Within 12 working days from the date of the close of the issue, the bond will be listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Investors have the option of holding the bonds in either dematerialized (demat) or physical form.

What are the TDS applicability and the minimum investment?

  • Being Tax Free bonds these instruments do not attract any TDS provisions. Minimum investment to be made is for Rs. 5000 or 5 bonds of face value Rs. 1000 each.

What is the Interest on Application money and Refund?

  • REC will pay successful applicants at the coupon rates as applicable and at 5% per annum to the unsuccessful applicants.

Effective yield

(30.9% tax bracket)11.95%12.60%12.47%Effecitve yield

(20.6% tax bracket)10.40%10.97%10.86%Effecitve yield

(10.3% tax bracket)19.21%9.71%9.61%

Options Series 1 Series 2 Series 3
Tenure 10 years 15 years 20 years
Coupon rates

(Retail Individual investors)

8.26% 8.71% 8.62%

What kind of taxes will the sale of these bonds attract?

  • Bonds listed on the stock exchange if held for more than 12 months before sale will attract a flat rate of 10% long-term capital gain tax. If held for less than 12 months it will be treated as short-term capital gain and will attract tax at the commensurate tax slab for the investor.

What makes the bond offer more attractive than last year?

  • Last year there was a huge disparity in the interest rate paid to retail-investors vi’s-à-vi’s other investors. Moreover, subsequent buyers of the bond from the secondary market were offered a lower rate of interest. The cut from G-Sec rate was also pegged on the higher side. All these aberrations have been more or less rectified this year.

The differential between the interest rates offered to the retail individual investor and the other category of investors have been reduced drastically and is now just 0.25 % as compared to 0.50% last year. This is one of the best things to have happened this year and is sure to attract more investors from other categories both during the initial period and later in the secondary market.

How has REC managed to announce higher interest rates in these indifferent market conditions?

  • The RBI, in an attempt to control the free-fall of the market in these trying financial conditions, has raised the yields of the benchmark government securities (G-Secs). The coupon rates of the REC bonds have been fixed on the basis of these G-Secs. It is because of this rise that REC has been able to offer such rates.

Verdict:

Given the current scenario, the REC interest free bonds are the best thing to have happened after the overall dismal market mood. It would perhaps not be right to compare this with the fixed deposit schemes offered by banks primarily because of its tax benefits. This is really a good investment option for those who are looking for long term, risk-free and tax free investments.

Also you need to evaluate your investment plan is completely in sync with your financial plan or not. To create this master financial plan which help you take all other financial and investment decisions of your life, we are offering a
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Jey S
Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
Lionel Faber
Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
Sridhar
Sridhar
8. September, 2021.
Financial planning brings peace in life. Holistic Investment have supported in arriving financial plan based on future goals. My investments are regular since then. They are professionals in their business, will recommend others.
Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
I got a free first time consultation. I got my doubts resolved. They also gave additional advises for investment planning which was also useful.
Nellai B
Nellai B
26. June, 2021.
I have been associated with them for the past three years. They are very professional and polite in answering all our questions. I have complete trust in their suggestions. I strongly recommend for anyone. I am looking forward to have strong and successful association with them.
Google rating score: 4.4 of 5,
based on 61 reviews

Google Reviews

Jey S
Jey S
24. September, 2021.
I have been using Holistic Investment Planners for the last three years. Mr. Srinivasavaradhan answered all my questions and doubts very patiently during the first free consultation. I was able to clearly define my short-, medium- and long-term goals once I signed up for the comprehensive plan and got their investment plan suggestion to achieve my goals. They are very polite and highly professional whenever I contact them for any queries or make investments. They never pressurize you to invest on their recommended financial products. I would have been lost money by investing directly without their help since I do not have time and knowledge about different financial products. Risk planning is also done as part of financial planning. Truly, they are holistic planners when it comes to your financial planning. They help you to define your life goals, understand your financial resources and establish a plan to invest towards reaching those goals. They do review your plan as you progress to make sure that you are on correct path to achieve those goals. Kudos to the team and keep up the good work!!! I am happy that I found holistic investment planners for my financial planning and management.
aksaswadkar
aksaswadkar
24. September, 2021.
I was about to retire and really not understanding how to invest money to have financial freedom and fulfilling my goals. Was desperately searching on internet way out and fortunately came across Holistic Investment Planners. I read number of articles on their website and realized that this is the agency which I want and engaged their services for my retirement planning. It is an excellent experience to be associated with Holistic. Right from day one our interaction was fantastic and they gave me such a wonderful plan that I had never imagined. I am fortunate enough to be in the client list of Holistic. I have recommended Holistic to my friends as well.
Lionel Faber
Lionel Faber
16. September, 2021.
I've been availing their services for the past year. They are highly knowledgeable in the field and are very patient with all doubts and queries. Personalized financial planning is provided keeping your short term, medium term and long term goals in mind. They do not pressurize you to purchase schemes of their choice. They provide their input and suggestions and leave the decision up to you which shows their honesty and high principle.
Sridhar
Sridhar
8. September, 2021.
Financial planning brings peace in life. Holistic Investment have supported in arriving financial plan based on future goals. My investments are regular since then. They are professionals in their business, will recommend others.
Nitesh Agrawal
Nitesh Agrawal
6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
Swetha Vasanth
Swetha Vasanth
6. September, 2021.
This is my first year service with the Holistic Team and I would say that they are very much helpful in creating a financial plan and follow ups during the year. I would definitely suggest them if anyone who is willing to proceed with their savings professionally.
Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
Srinvas Kannan
Srinvas Kannan
30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
I got a free first time consultation. I got my doubts resolved. They also gave additional advises for investment planning which was also useful.
Nellai B
Nellai B
26. June, 2021.
I have been associated with them for the past three years. They are very professional and polite in answering all our questions. I have complete trust in their suggestions. I strongly recommend for anyone. I am looking forward to have strong and successful association with them.
Google rating score: 4.4 of 5,
based on 61 reviews

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