Nov 29, 2012

REC (Rural Electrification Corporation Ltd) Tax Free Secured Redeemable Non Convertible Bond - DECEMBER 2012


REC (Rural Electrification Corporation Ltd) Tax Free Secured Redeemable Non Convertible Bonds Starts on 3rd Dec 2012. Investment Can be made In Demat Form as well as Physical Forma, at the option of Applicants. 

Issuer: Rural Electrification Corporation Limited
Issue Open: December 3, 2012
Issue Close: December 10, 2012
Issue Size : Rs 4,500 crores
Face Value: Rs.1000
Minimum Application Size: 5 Bonds (Rs.5000) and in Multiples of 1 Bond (Rs.1000) thereafter
Listing: BSE, NSE (The Bonds are proposed to be listed within 12 working days from Issue Closing Date)
Mode of Allotment: Dematerialised and Physical form
Trading: Only in Dematerialised form

Rating:
  • “CARE AAA” by CARE
  • “CRISIL AAA” by CRISIL
  • “[ICRA] AAA” by ICRA
  • “IND AAA” by IRRPL (formerly Fitch Ratings India Pvt. Ltd)

Categories of Reservation (%age of issue Size):
1. Category I– QIB’s- 30%
2. Category II- Non Institutional Investors-15%
3. Category III– HNI’s*- 15%
4. Category IV– Retail Individual Investors**- 40%
* Individuals and HUFs applying for an amount above Rs. 10 lac
**Individuals and HUFs applying for an amount up to Rs. 10 lac
Interest on Application Money Liable to be Refunded (except for ASBA): 5.00% p.a.
Who is NOT eligible to Invest in REC Tax Free Bonds:

a) Minors without a guardian name; 
b) Foreign nationals; 
c) Non-Resident Indians; 
d) Persons resident outside India; 
e) Venture Capital Fund and Foreign Venture Capital Investor; 
f) Foreign Institutional Investors, Qualified Foreign Investors; 
g) Overseas Corporate Bodies; 

Can an applicant make additional / multiple applications? Ans: An Applicant can make one or more Applications for the Bonds for the same or other Series of Bonds, subject to a minimum application size of Rs. 5,000 (5 Bonds).  For the purposes of allotment of Bonds under the Issue, Applications shall be grouped based on the PAN, i.e. Applications under the same PAN shall be grouped together and treated as one Application. Two or more Applications will be deemed to be multiple Applications if the sole or first applicant is one and the same. For the sake of clarity, two or more applications shall be deemed to be a multiple Application for the aforesaid purpose if the PAN number of the sole or the first applicant is one and the same. 

Yield Offered: 
Options
Series of Bonds*
Tranche 1 Series 1
Tranche 1 Series 2
Tenor
10 Years
15 Years
Frequency of interest payment
Annual                                                                                                      Annual
Mode of payment
Through various modes available**
Through various modes available**
Coupon rate (% p.a.) for Category I,II,III
7.22
7.38
Additional Coupon Rate*** (% p.a.) Category IV***
0.50
0.50
Aggregate Coupon Rate (% p.a.) for Category IV***
7.72
7.88
Effective yield(% p.a.) for Category I, II
and III applicants
7.22
7.38
Effective yield (% p.a.) for Category
IV applicants***
7.72
7.88
Coupon Type
Fixed coupon rate
Fixed coupon rate


Benefits to the Investor:  

  • The income by way of interest on these Bonds is fully exempt from Income Tax as per provisions under section 10 (15) (iv) (h) of IT Act
  • 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. 
  • As per provisions under section 2 (29A) of the I.T. Act, read with section 2 (42A) of the I.T. Act, a listed Bond is treated as a long term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer. Under section 112 of the I.T. Act, capital gains arising on the transfer of listed Bonds shall be taxed @ 10% without Indexation or @ 20% with indexation. 

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