National Highway Authorities of India Tax Free Bond and Stock Market Investment


National Highways Authority of India (NHAI), has go into the debt capital market on 15.01.2014, with an topic of Tax Free Bonds of face worth of Rs. 1,000 apiece, in the nature of Secured Redeemable Non Convertible Debentures.

Issue Details

Concluding on 05.02.2014, issue has a size of Rs. 1,000 crore, with an alternative in companies hand to retain an over-subscription up to Rs. 2,698 crore, taking total fund-raising to Rs. 3,698 crore. Minimum application amount is Rs. 5,000, and in multiples of Rs, 1,000 thereafter. Allocation will be on first come first serve basis.


AAA by CRISIL, CARE and BRICKWORK, indicating uppermost degree of safety regarding appropriate servicing of financial compulsion

Issue Listing

National Stock Exchange and Bombay Stock Exchange, Bonds are to be concern mutually in physical and dematerialized form, therefore a demat account is not essential to purchase these bonds. Trading in the bonds will unavoidably be in the demat form.

Proffer of the Issue

The current bonds are being offered fewer than two series with features as under:


Series I

Series II


10 Years

15 Years

Frequency of Interest Payment



Coupon Rate (%) Per Ann-um

# For Retail Investors *

8.52% P.A

8.75% P.A

# Other Than Retail Investors

8.27% P.A

8.50% P.A

Put/Call Option



*Retail investor defined as resident individual, HUF and NRIs upto limit of Rs. 10 lakh

Allocation ratio: 40 percent for retail investors, 20 percent for High Net worth Individuals, 30 percent for corporate, 10 percent for Qualified Institutional Buyer

Rate of Return

National Highway Authorities of India’s 15 year (Series 2) bonds carrying 8.75 percent per annum coupon for retail investors, are comparable to 12.66 percent pre-tax return earned on other fixed income instrument, presumptuous the highest tax bracket of 30.9 percent for retail individuals. These rates are 10 basis points (0.10%) higher than Indian Railway Finance Corporations issue currently open for subscription carrying same AAA credit rating.

Seeing as tax free bonds score over company Non Convertible Debentures due to longer duration and higher tax-efficient returns, no point comparing this issue with Non Convertible Debentures of ECL Finance, Manappuram, Muthoot and SREI Infra for investors in the highest tax chunk of 30.90 percent. Those in the lower tax bracket of (0%, 10% or 20%) can consider the Non Convertible Debentures only if they have a lower time horizon for three or five years.


National Highway Authorities of India bond issue is not the best-looking, due to comparatively lower tenure of fifteen years. Although coupon rate is higher than IRFCL, inform to wait for other tax free bond issues with 20 year bonds, which are likely to open for subscription over the next duo of months.

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