India Infrastructure Finance Co. Ltd (IIFCL) is a government-owned company and loans it undertakes are guaranteed by the government.
The company is authorized to raise up to Rs.10,000 crore through such bonds in this fiscal and has already raised around Rs.2,963 crore through private placements.
This issue aims to raise Rs.500 crore with an option to retain oversubscription up to Rs.2,000 crore.
These secured bonds come in 3 series of different maturities—10, 15 and 20 years.
The coupon rate is 8.26% for the 10-year bond, 8.39% for the 15-year bond and 8.75% for the 20-year bond.
For retail investors, this is 0.25% more than investors in other categories.
For people in any age group…just opt for the 20 year bond – not sure if there is a cumulative option. If there is a cum option put a small amount of money – say Rs. 100,000 in the cum option. In the regular option you should put say 20% of your debt portfolio.
Tax free 8.75% is far, far superior to all the annuities in the market. The last time I checked out the annuity pricing it was at about 7% by LIC – the others were WORSE. – and that too taxable.
Assuming you are say 63 years of age – this 20 year bond will see you through the major part of your life – and it is free of default risk. I may still worry a little bit about delay risk, but not too much.
Is there still a risk? yes…the risk of ‘Call’ – if the interest rates drop to say 5% (remember 2006?) the company may just cancel the debentures – AND REFUND THE MONEY to you – but if I would live with that.
When I say a product is good, I have no clue whether it suits YOU or not. That is for you or your financial planner to decide.
Like if somebody tells me ‘Kentucky Fried Chicken’ has introduced a new mouth watering chicken dish, I can at best smile – it is not for me!
Remember you owe me a fee…..
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