IFCI Long Term Infrastructure Bonds – SERIES III

Team CrawFin/ Harshal Jawale, CFP^CM

Our Assessment -

Infrastructure bonds were introduced in the last financial year by the Finance Minister to offer tax benefit on the investment of upto Rs 20,000 u/s 80CCF. IFCI is one of the oldest financial Institutions who are engaged into offering such bonds.

Coupon rate has been increased from 8% last year to 8.5% this year. Although it is not very attractive as against Bank FD (Interest rate 9.5-10%) or PPF (even maturity amount is non-taxable); it is worth due consideration for someone who is paying even Rs 500 tax after exhausting Rs 1Lkh limit u/s 80C.

The indicative yield for the option I is 8.5%, 9.65%, 10.95%, 12.44% for zero tax slab, 10% tax slab, 20% tax slab and 30% tax slab respectively. If you sell this bond post 5 years lock in period through BSE or under buyback mode, your yield will move higher. For instance if you are in 30% tax slab and goes through buyback mode after 5 years your yield will be around 16.52% pa. This happens because 30% tax benefit that you receive spreads through lesser time now i.e. 5 yrs against 10 yrs in previous case.

In my view it is a screaming buy if your tax slab is 20% or higher else you have enough options to make investment decisions safest and most favorite being Bank FD at 10% pa interest rate.

Other Details –

Deemed date of allotment – 12, December 2011

Listing – on BSE

Benefits – Tax exemption u/s 80CCF up to investment of Rs 20,000

Options	I	II	III	IV
Interest Payment	Cumulative	Annual	Cumulative	Annual
Tenor	10 yrs	10 yrs	15 yrs	15 yrs
Face Value (Rs/Bond)	Rs 5000
Issue Price	At par
Terms of Payment	Full Amount with Application
Coupon (% pa)	8.5% pa (Compounding)	8.5% pa	8.75% pa (Compounding)	8.75% pa
Coupon Payment date	At the time of redemption	12, Dec. every year	At the time of redemption	12, Dec. every year
Maturity Date	Dec. 12, 2021		Dec. 12, 2026
Buyback Option	Yes	Yes	Yes	Yes
Buyback Dates	Dec 12 of 2016 and 2018		Dec 12 of 2016 and 2018
Buyback Intimation	August 12 to September 11 of  years 2016 and 2018		August 12 to September 11 of  years 2016 and 2018
Redemption Amt (Rs/Bond)	11305/-	5000/-	17596/-	5000/-
Redemption Amount if buyback exercised (Amount in Rs)
End of year 5	7519/-	5000/-	NA	NA
End of year 7	8851/-	5000/-	8995/-	5000/-
End of year 10	NA	NA	11569/-	5000/-
End of year 12	NA	NA	13682/-	5000/-
Lock-in Period	5 years from deemed date of allotment