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  #1  
Old 23rd September 2011, 12:39 AM
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Default IFCI Tax Saving Bonds



I heard that IFCI tax saving bonds are open for subscription. I couldn't locate the prospectus.

I will not invest in this as IDFC bonds are coming with much better ratings.
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  #2  
Old 23rd September 2011, 07:51 AM
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Originally Posted by rajivka View Post
I heard that IFCI tax saving bonds are open for subscription. I couldn't locate the prospectus.

I will not invest in this as IDFC bonds are coming with much better ratings.
IFCI's Tier II Bonds are available right now. Are you talking about these?

SERIES III

These are not tax saving bonds.
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  #3  
Old 23rd September 2011, 10:46 AM
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Originally Posted by Alchemist View Post
IFCI's Tier II Bonds are available right now. Are you talking about these?

SERIES III

These are not tax saving bonds.
No, I knew about this also.

But Tax saving bonds opened yesterday. I got this information from multiple sources. The interest rate is 8.5% for 10 years and 8.75% for 15 years. But I could not locate the prospectus for the same.

Some information is available here.

80CCF Infrastructure Bonds Calendar 2011

I got this information from Bajaj Capital, JM Financial also. So I believe this information is true.
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  #4  
Old 23rd September 2011, 11:59 AM
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Originally Posted by rajivka View Post
I heard that IFCI tax saving bonds are open for subscription. I couldn't locate the prospectus.

I will not invest in this as IDFC bonds are coming with much better ratings.
@rajivka, from your posts I see you are more active in fixed instruments schemes and also in most of them.

Unlike equity market, in fixed instruments schemes we know straight forward that how much would be the return.

Is there any specific reason for being active in most of them? If you know the interest rate is high why don't you select three or four and invest all of your money?

Just trying to understand and learn from you.
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  #5  
Old 23rd September 2011, 12:36 PM
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Originally Posted by paran View Post
@rajivka, from your posts I see you are more active in fixed instruments schemes and also in most of them.

Unlike equity market, in fixed instruments schemes we know straight forward that how much would be the return.

Is there any specific reason for being active in most of them? If you know the interest rate is high why don't you select three or four and invest all of your money?

Just trying to understand and learn from you.
I agree with you the return is fixed. But as it is traded in market, the yield keeps on changing. Also when new NCDs come, the older NCDs may become unattractive.

In the recent NCDs, I invested only in four of them
- Shriram Transport
- Shriram City
- Muthoot
- Religare

I already had some holdings of Shriram Transport 2010.

I did not apply for India Infoline and Manappuram but I bought small quantity from market. I sold all of Shriram City @1000 (Net result is brokerage loss and blocking my money for around month time) to buy Muthoot from the market.

Ideally I would have preferred to keep Shriram City. But seeing the price difference between Muthoot and Shriram City. I may again switch to Shriram City if I find price favorable.

When I apply for NCD, I ask myself a question - Can I hold these NCDS for full term of NCD. If answer is yes I will apply otherwise no.

And Later, depending upon current yield, reputation of company, credit ratings, time period left and other opportunities I may sell or buy the NCDs.

Infrastructure bonds are different than NCDS. Here interest rates are less. But because of saving taxes, effective yield is better. But maximum you can invest in infrastructure bond is Rs 20000. There is no reason why I should invest more than Rs 20000 in such bonds.
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  #6  
Old 26th September 2011, 11:33 AM
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I am still not able to find any information on IFCI website.

But the forms are available at Karvy site.

http://markit.karvy.com/General%20In...on/IFCIT3.aspx

I am surprised how a issue is open without proper advertisement.
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  #7  
Old 26th September 2011, 12:05 PM
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Originally Posted by rajivka View Post
I am still not able to find any information on IFCI website.

But the forms are available at Karvy site.

http://markit.karvy.com/General%20In...on/IFCIT3.aspx

I am surprised how a issue is open without proper advertisement.
On ICICIDirect.com, there are two options available for IFCI Bonds.

First issue opened on 5th September and closes on 10th October. This issue is for Tier II bonds and not infrastructure bonds.

Second issue opened on 23rd September and closes on 14th November. This one is for infrastructure bonds.

The first issue has a minimum application size of Rs 1 lac.

The minimum application size of the second issue is Rs 5000.

There are no details available for the second issue (infrastructure bonds).
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  #8  
Old 26th September 2011, 12:12 PM
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IFCI's site has press releases related to the infrastructure bonds, but not the offer document.

Corporate Financial advisory, Financial Consultancy & Project Finance in India
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  #9  
Old 26th September 2011, 12:29 PM
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Originally Posted by Alchemist View Post
On ICICIDirect.com, there are two options available for IFCI Bonds.

First issue opened on 5th September and closes on 10th October. This issue is for Tier II bonds and not infrastructure bonds.

Second is issue opened on 23rd September and closes on 14th November. This one is for infrastructure bonds.

The first issue has a minimum application size of Rs 1 lac.

The minimum application size of the second issue is Rs 5000.

There are no details available for the second issue (infrastructure bonds).
Is ICICIdirect allowing you to apply online for TIER II bonds. I think these bonds are on private placement only.
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  #10  
Old 27th September 2011, 08:57 AM
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Originally Posted by rajivka View Post
Is ICICIdirect allowing you to apply online for TIER II bonds. I think these bonds are on private placement only.
Yes, now both the tier II bonds and infrastructure bonds are available on ICICIDirect.

IFCI Tier II Bonds (Series III):



IFCI Infrastructure Bonds (Series III):


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  #11  
Old 27th September 2011, 11:55 AM
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For the tax savings bonds, does it make sense to purchase the 10 yr or the 15 yr bond ?

The non-tax saving bonds are yielding around the 11% mark.

In that case, given that the tax savings bonds have a coupon of around 8.5 %, will the face value drop in the secondary market ( after the lock-in period is over ) to match the 11% yield given by other bonds ?

PS - For simplicity, assume that interest rates remain the same over the next 15 years.
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  #12  
Old 27th September 2011, 02:35 PM
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Originally Posted by sdp1975 View Post
For the tax savings bonds, does it make sense to purchase the 10 yr or the 15 yr bond ?

The non-tax saving bonds are yielding around the 11% mark.

In that case, given that the tax savings bonds have a coupon of around 8.5 %, will the face value drop in the secondary market ( after the lock-in period is over ) to match the 11% yield given by other bonds ?

PS - For simplicity, assume that interest rates remain the same over the next 15 years.
I think suggest you to wait for IDFC

IDFC to sell Rs 5000 crore of tax-saving bonds - Economic Times

The rating assigned to IDFC is AAA. You won't get 11% interest in AAA rating bonds. If the interest rate is same or more for IDFC, I would certainly recommend you to apply for the same.
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  #13  
Old 27th September 2011, 08:07 PM
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Thanks for the information on the IDFC bonds, definitely worth a wait.

However, the question I had on the yield of these bonds still remains open.

These tax saving bonds always give less interest than the non-tax saving bonds - such as 8% vs 10%.

So once the tax-saving bonds start being traded in the secondary market, they must be trading at a discount to match the yield of the non-tax saving bonds . Am I correct ?

After all, an investor purchasing from the secondary market would certainly be looking at the yield and it makes no difference that the bond was originally issued as a tax-saver.
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  #14  
Old 28th September 2011, 01:18 AM
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Originally Posted by sdp1975 View Post
Thanks for the information on the IDFC bonds, definitely worth a wait.

However, the question I had on the yield of these bonds still remains open.

These tax saving bonds always give less interest than the non-tax saving bonds - such as 8% vs 10%.

So once the tax-saving bonds start being traded in the secondary market, they must be trading at a discount to match the yield of the non-tax saving bonds . Am I correct ?

After all, an investor purchasing from the secondary market would certainly be looking at the yield and it makes no difference that the bond was originally issued as a tax-saver.
I don't think tax saving bond can be traded in the secondary market. If it is then there will be no locking period for the holder and hence the whole idea won't sustain.
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  #15  
Old 28th September 2011, 09:03 AM
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Originally Posted by sdp1975 View Post
So once the tax-saving bonds start being traded in the secondary market, they must be trading at a discount to match the yield of the non-tax saving bonds. Am I correct ?
You are correct about the yield part, but the bonds won't be listed till the lock-in period is over. .
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  #16  
Old 28th September 2011, 10:29 AM
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Quote:
Originally Posted by sdp1975 View Post
Thanks for the information on the IDFC bonds, definitely worth a wait.

However, the question I had on the yield of these bonds still remains open.

These tax saving bonds always give less interest than the non-tax saving bonds - such as 8% vs 10%.

So once the tax-saving bonds start being traded in the secondary market, they must be trading at a discount to match the yield of the non-tax saving bonds . Am I correct ?

After all, an investor purchasing from the secondary market would certainly be looking at the yield and it makes no difference that the bond was originally issued as a tax-saver.
Let's assume you are in 30% bracket. There are bonds which is giving 14% return. There are another bonds which are giving 8% return with section 80CCF rebate. In both cases there are option A and B where A is cumulative returns and B is annual interest payment. Both have tenure 10 years.

Option 1:
Invest 20000 in 8% bond option (B):
Pre Tax Returns:
1600 per year for 10 years
20000 after 10 years
Post tax returns:
1120 per year for 10 years
2000 per year after 10 years

Option 2:
Pay 6000 as tax and put 11000 in 14% bonds type (B) and 3000 in type (A)
Pre tax returns
1540 per year for 10 years
11000 + 11122 (Maturity value of 3000) after 10 years
Post tax returns:
1078 per year for 10 years
19686 after 10 years (2436 as tax)

You yourself see which is better? Of course the calculation will be different if you are in 20% range. But even if you are in 20% range, it is good to invest in 8% bond under 80CCF.

If you sell after 5 years, it may be possible, you won't be able to recover the principal. But if you consider your principal as 14000 (as you save 6000 as tax), you should be able to recover more than that.
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  #17  
Old 3rd August 2017, 02:56 PM
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I was looking at the Untitled Page and found it too attractive.

With the maturity on 31st January 2021 and maturity value of around 11047 and assuming purchase price of 7500, the yield comes out to be more than 11.5. Even if I buy at 7800, the yield is around 10.5 which seems attractive to me in current scenario.

Do you think anything bad in this investment?
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