Issue Opening Date: December 3, 2012
Issue Closing Date: December 10, 2012
Allotment Basis: First-come-First-serve basis.
Issuer: Rural Electrification Corporation Limited
Instrument: Tax Free Secured Redeemable Non Convertible Bonds of Face Value of Rs. 1,000 each in the nature of debentures having tax benefits under Section 10 (15)(iv)(h) of the Income Tax Act, 1961, as amended (“Bonds”)
Mode of Issue: Public Issue of Bonds
Issue Size: Rs. 1,000 crore with an option to retain oversubscription upto the Shelf Limit i.e. Rs 4,500 crores
Security: First pari passu charge on the identified immovable property(ies) and book debts of the Company, other than those that are exclusively charged/earmarked to any other lender(s), with a minimum security cover of one time of the aggregate face value amount of Bonds outstanding at all times
Listing: BSE and NSE. NSE shall be the Designated Stock Exchange for the Issue. The Bonds are proposed to be listed within 12 working days from the Issue Closing Date.
Credit Ratings: “CRISIL AAA/Stable” by CRISIL “CARE AAA” by CARE “IND AAA” by IRRPL and “[ICRA] AAA” by ICRA Interest payment date December 01, of every year.
Interest on Application Money receiving allotment: @ the rate of 7.22% p.a. and 7.38% p.a. on Tranche 1 Series 1 and Tranche 1 Series 2 respectively for allottees under Category I, Category II and Category III Portion, and @ the rate of 7.72% p.a. and 7.88% p.a. on Tranche 1 Series 1 and Tranche 1 Series 2 respectively for allottees under Category IV Portion. (subject to deduction of tax at source, as applicable)
Interest on application money receiving refunds: @ the rate of 5.00 % p.a. for all Category Portions (subject to deduction of tax at source, as applicable)
Issue Price: Rs. 1,000 per Bond.
Put/Call Option: There is no put/call option for the Bonds.
Minimum Application Size: 5 Bonds (Rs. 5,000) and in multiples of 1 Bond (Rs. 1,000) thereof
Deemed Date of Allotment: The date on which the Board of Directors or Bond Committee of REC approves the Allotment of the Bonds or such date as may be determined by the Board of Directors or Bond Committee and notified to the stock exchanges. All benefits relating to the Bonds including interest on Bonds shall be available to the Bondholders from the Deemed Date of Allotment. The actual allotment of Bonds may take place on a date other than the Deemed Date of Allotment.
Mode of Allotment: In dematerialised form as well as in physical form, at the option of applicants
Depositories: NSDL and CDSL
Trustee: SBI Cap Trustee Company Ltd.
SALIENT FEATURES OF THE PROPOSED TAX FREE BONDS
- The CBDT, MOF, GoI, by virtue of powers conferred upon it under item (h) of sub clause (iv) of clause (15) of Section 10 of the Income Tax Act, 1961, has issued notification authorising REC to issue Bonds for an amount aggregating to Rs. 5,000 crores in one or more Tranches during the financial year 2012-13. Out of the allocated limit of Rs. 5,000 crores, REC has raised Tax Free Bonds aggregating to Rs. 500 crores on private placement basis on November 21, 2012. Consequently, the Shelf Limit stands reduced to Rs. 4,500 crores. This Tranche-1 Issue is of Bonds aggregating to Rs. 1000 crores (Base Issue) with an option to retain oversubscription upto the Shelf Limit (Rs.4500 crores).
- Tax benefits u/s 10 (15) (iv) (h) of the Income Tax Act, 1961 – interest on these Bonds shall not form part of total income.
- Credit Ratings of “CRISIL AAA/Stable” by CRISIL, “CARE AAA” by CARE , “[ICRA] AAA” by ICRA & “IND AAA” by IRRPL indicating Highest Degree of Safety in terms of timely servicing of financial obligations.
- Bonds to be allotted in dematerialized form as well as in physical form, at the option of the applicants but tradable in dematerialized form.
- Allotment would be on first come first serve basis based on the date of upload of the application on the electronic system of the stock exchanges.
- Bonds are proposed to be listed on the BSE and NSE.
HIGHLIGHTS OF TAX BENEFITS
- Interest from these Bonds shall not be included in total income of any person as per provisions of Section 10 (15) (iv) (h) of Income Tax Act, 1961.
- Since the interest income on these Bonds is exempt from tax, no Tax Deduction at Source is required.
- Wealth Tax is not levied on investment in bonds under section 2(ea) of the Wealth-tax Act, 1957
- The Bonds being listed with BSE & NSE shall be treated as a long term capital asset if they are held for more than 12 months and therefore capital gains arising on the transfer of Bonds shall be subject to tax at the rate of 20% of capital gains calculated after reducing indexed cost of acquisition or 10% of capital gains without indexation of the cost of acquisition.