The National Highways Authority of India (NHAI) has come out with its new Non-Convertible Debentures (NCDs) issue to raise up to ₹1500 crores. Investors can participate in the issue from October 17 to November 7, 2022.
The bonds, issued by the National Highways Infra Trust (NHIT), would pay 7.90 per cent interest semi-annually, which is slightly higher than the interest rate offered by bank-sponsored fixed and recurring deposits. The effective yield would turn out to be 8.05 per cent for all NCD holders every year. The credit rating is high, given the fact that CARE Ratings Limited has rated them ‘CARE AAA/Stable’ while India Ratings and Research Private Limited has rated them ‘IND AAA/Stable’.
The tenure of the investment has been fixed at 25 years, thus, labelling it as a long-term investment option.
The based issue size of the NCD issue will be ₹750 crores, though the NHIT would be allowed to retain an added amount of ₹750 crores if oversubscribed. The NHIT has announced the minimum application size as ₹10,000, i.e., the price of 10 NCDs and in multiples of ₹1,000 (i.e., one NCD), thereafter. The small ticket size will allow retail investors to park their funds in them as opposed to many other NCDs open for institutional investors, non-institutional investors, and high-net-worth individuals. Like many other NCDs, interested investors must invest in them through their Demat accounts.
The NHIT does not intend to become a publicly listed Infrastructure Investment Trust (InvIT) in the near future. Suresh Goyal, MD & CEO of National Highways Infra Investment Managers said, “The institutional investors including both foreign and domestic players who have parked their money in NHIT have shown keen interest in holding on to their shareholding,” adding, “We will go forward with the next two rounds of fundraising before looking to become a publicly listed InvIT.”
As per a release by the NHAI, “Institutional investors who have subscribed to the units include the Canada Pension Plan Investment Board, the Ontario Teachers’ Pension Plan Board, the State Bank of India, the SBI Pension Fund, the SBI Mutual Fund, the IOCL Employee Provident Fund, the L&T Staff Provident Fund, the Rajasthan Rajyut Karamchari Pension Fund, the TATA AIG and Star Union Daiichi Life Insurance.”
Redemption in three tranches
The NCDs that would be issued on a first-come-first-serve basis would consist of three Separately Transferable Redeemable Principal Parts (STRPPs). These would be allotted in dematerialized forms with each STRPP being a trading lot. The NCDs would be redeemed gradually at distinct face values and different maturities. As per the release published on the BSE site, “Each NCD shall comprise of three STRPPs having different ISINs and face value:
(a) 1 STRPP A of face value of ₹300;
(b) 1 STRPP B of face value of ₹300;
(c) 1 STRPP C of face value of ₹400.”
The first tranche of the investment would be redeemed after 13 years from the proposed date of allotment, the second being after 18 years and the remaining on the maturity date, i.e., after 25 years.
The NCDs would be listed on the BSE Limited and the National Stock Exchange of India (NSE), though the former would be the designated stock exchange for the issue. This means that there would not be any tax advantage in the form of indexation benefits. Both the interest and maturity amounts would be taxed as per the prevailing tax slab at the time of maturity.