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IRFC tax-free bonds subscribed four times on day one
March, 12th 2016

Indian Railways Finance Corporation's ( IRFC) tax-free bonds were oversold, almost four times higher than planned. With this, the issuer marked the season's end although the issue would remain open for subscription till Monday next as the retail portion is not fully subscribed.

The company on Thursday received bids for Rs 9,452 crore against Rs 2,450 crore, the total issue size. However, the retail portion, which was 60% of the size, was not fully subscribed, and limited to 0.72 times till Thursday.

Earlier on Wednesday, another state-owned entity National Bank for Agriculture and Rural Development opened similar taxfree bond subscription but only to raise Rs 3,500 crore. It has so far received bids for Rs 14,072 crore, four times higher than the actual size. But, it too fell short of retail subscriptions, which are now at 0.82 times of the investment limit. Both bonds are offering rates at 7.29-7.64% with 10 and 15-year maturities.

"The residual retail limits would be over by next few days as the issue remains open," said Ajay Manglunia, executive vice president-fixed income at Edelweiss Finance. "There's no ebbing of investor interest. It is just that some equity investment options have taken away some retail money."

For instance, the government sold 5% stake in Container Corporation of India (Concor) through the Offer for Sale route. It too has oversubscribed tapping retail money. Also, investors are partially flocking back to equities with the Sensex rising since the budget announcements. "Residual retail limits do not suggest any ebbing of invest appetite but a question of temporary liquidity matter amid the government's disinvestment plans," said Deepak Panjwani, head of debt markets at GEPL Capital.

The government allowed the additional fund raising on condition that a higher portion of the issue is set aside for retail investors, who can buy up to 60% of these bonds compared with 40% in earlier issues sold this financial year.

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