IIFCL to float Rs 10000 cr tax free bonds by Feb

In a move which will open yet another window for tax saving, India Infrastructure Finance Company Ltd (IIFCL) is likely to float the
first tranche of Rs 10,000 crore of tax free bonds by the first week of February.

The tax free bonds, carrying sovereign guarantees, are primarily designed to enable uninterrupted funds for infrastructure sector, especially new road and port projects.

The bonds, which were announced as part of the first stimulus package by the UPA government, are intended to provide re-finance facility to banks, in turn enabling banks to offer long-term financing for infrastructure projects.

"This is an innovative interim measure to provide re-finance facility to banks to encourage them to offer long-term debts," said Montek Singh Ahluwalia, deputy chairman, Planning Commission.

Government sources said the funding was not intended for ongoing projects but meant only for new projects in the infrastructure sector. However, the finance ministry is looking at the possibility of allowing even projects which are awaiting financial closure to tap the IIFCL funds.

The proposal suggests that banks will be asked to provide loans for a period of up to 20 years to companies investing in infrastructure sectors and would not be required to pay back the loan for the first 5-7 years.

The move will encourage banks to go for long-term lending, as they are reluctant to lend to the infrastructure sector because of the long gestation period.

The government is also exploring the possibility of allowing IIFCL to raise funds abroad for subsequent tranches. The first tranche will be raised domestically.

The interest on tax free bonds will be linked to the actual cost incurred by IIFCL. Resetting of interest rate on these bonds will be linked to prevailing rates in the government securities (G-Sec) market, sources said.

Officials argued that it may not be the right time to raise funds abroad, but once the international markets settle down in two to three months, it would be a good opportunity to raise funds in overseas markets.

They also said that since raising ECBs was turning into a cumbersome exercise, the concept of sub-sovereign loans from overseas could be encouraged as a temporary mechanism.

http://timesofindia.indiatimes.com/Business/IIFCL_to_float_Rs_10000_cr_tax

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IIFCL to float Rs 10000 cr tax free bonds by Feb