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Infrastructure Bonds issued by Indian Railway Finance Corporation (IRFC). The interest income earned on such bonds is tax free (u/s 10 clause 15 of Income Tax Act). The bonds are issued by a Government Owned Undertaking and therefore carry a very high credit rating. The issue has been rated ‘AAA/Stable by CRISIL’, ‘LAAA by ICRA’ and ‘AAA by CARE’.  The issue has two options – Option I (10 years) & Option II (15 years) – with coupon rates of 7.55% and 7.77% p.a. respectively. As the interest income is tax free, the pre-tax yield works out to an impressive 10.93% and 11.24% for Option I & Option II (for individuals in the highest tax bracket).

Infrastructure Bonds issued by Indian Railway Finance Corporation (IRFC) Issue Details:

Infrastructure Bonds issued by Indian Railway Finance Corporation (IRFC) eligible Investors-Resident Indian Individuals, Scheduled Commercial Banks, Co-operative Banks, Financial Institutions, Insurance Companies, Provident Funds, Companies & Bodies Corporate, Trusts & Societies and any other authorized investor.

Company Profile: IRFC is notified as a Public Financial Institution u/s 4A of Companies Act, 1956. It is the financing arm of Indian Railways. 100% shareholding is held by  Government of India. It has been consistently making profits and rated AAA by CRISIL, ICRA and CARE. The company’s Capital Adequacy Ratio stood at 160.70% and Profit after Tax was Rs.485.20 Cr as of March 31, 2011.

Important Dates-The issue opens on Oct 10, 2011 and closes on Oct 21, 2011.  The bonds are likely to be issued in Demat form and are proposed to be listed on the National Stock Exchange (NSE).

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