Most of the money being raised through tax free bonds in this last month of the financial year are primarily from companies which have done it earlier. After IRFC, HUDCO, REC and others, National Housing Bank too is raising funds now through its second tranche of tax free bonds. The bond is already seeing a huge interest from the investors which can be seen from the fact that NHB is closing issue early tomorrow.
Let see what is on offer by the company and why does NHB favored by investors-
About The Organization National Housing Bank is wholly owned by Reserve Bank of India. The primary objective of NHB is to promote financial institutions which are in housing sector and support them. Established in 1988, it has been doing well meeting its objective of a sound housing finance system in the country. The company has been going strong on financials too with its refinance distribution and profits, both registering a higher growth.
The Bond Issue NHB is raising Rs 250 crore through this tax free bond issue. The company can retain oversubscription upto Rs 1000 cr and has an early closing option. The bond is rated AAA by CRISIL, AAA by ICRA and AAA by care which is a high rating and a stable outlook. 40% of the issue size is reserved for retail investors and the bonds are allotted on first come first serve basis.
The face value of the bond is Rs 5000 each and one can apply even for a single bond. These are available for 10, 15 and 20 years horizon. One can apply in either physical or demat form but only in multiple of 1 bond. Post-closing of the issue, NHB bonds will be listed at National Stock Exchange within 12 working days , where they will be available for trading to investors.
Interest Rates NHB is offering higher interest rates to retail investors. It is 8.50%, 8.93% and 8.90% or 10, 15 and 20 years horizon. The interest will be paid annually to the investor which will start from one year from the date of allotment.
Why You Should Invest? The attraction to NHB bonds has its reasons. The organization status and its financials provides a high amount of safety to investors. The performance of the company in promoting housing financial sector is highly commendable.
One of the main features of the bond is that it is offering 8.93% rate of interest to retail investors which is quite high. The listing on stock exchange also offer a no-lockin and provides a higher liquidity if investors want to exit before the mandated term. Moreover, the tax free nature of the interest makes yield higher for investors who are in the highest tax bracket, reaching to almost 12%.
Since the interest is payable annually, the option is highly attractive for investors seeking regular income i.e. retirees. The 40% reservation to retail investors also ensures that many get their allotment. Keeping in mind the reinvestment and inflation risk, these tax free bonds by NHB are an attractive investment which is surely recommendable.