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Wednesday, September 04, 2013

REC Tax Free Bond Status: Individual Investors can still invest

here is some update with regards to REC Tax Free Bonds which can give a tax free interest rate upto 8.71% for retail investors (investors investing upto 10 lakhs)

The bond size is 1000Cr with oversubscription upto 2500Cr

So total size of the issue is 3500Cr
the issue has been divided into portions for different categories of investors

Category 1: 20% of issue 200Cr (over subscription: 700Cr)
Category 2: 20% of issue 200Cr (over subscription: 700Cr)
Category 3: 20% of issue  200Cr (over subscription: 700Cr)
Category 4: 40% of issue 400Cr (over subscription: 1400Cr)

Individual investors are Category 4: i.e. Individual investors can invest upto 1400Cr worth
Since REC is going to retain oversubscription .. oversubscription upto 3.5 is acceptable.

Latest update on subscription (as of Sept 3,2013 5:00pm)
Category 1: over subscription: 1.15 (200 x 1.15 = 230Cr)
Category 2: over subscription: 3.55 (200 x 3.55 = 710Cr)
Category 3: over subscription: 3.55 (200 x 3.55 = 710Cr
Category 4: over subscription: 2.51 (400 x 2.51 = 1004Cr)

Total Over Subscription: 2.65 (1000 x 2.65 = 2650 Cr)

PN: Category 2 and Category 3 who have completely oversubscribed and are Corporate's and HNI respectively .. (So they know its good and we should also understand that its good and invest)

Conclusion: there is still about 3500 - 2650 = 850Cr worth of investment that can be done by individual investors.. So go ahead and buy.. we should see a premium listing.. of the bonds and you can make a packet (10-25%) even in the short term .. Money refunded will be paid back with interest at the rate of: 5% .. the buffer days between date of allotment and actual issue of bonds will be paid interest at the rate of issue .. so if you applied for 8.71% you will get interest at the rate of 8.71% along with the bonds..

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