IDFC to issue tax-free bonds

India-focused Infrastructure Development Finance Company (IDFC) has announced plans to raise up to INR25bn by issuing tax-free bonds to investors in 2011. A senior company official said further details of the bonds will be announced in the next three to four weeks.

India’s Infrastructure Development Finance Company (IDFC) is planning to raise up to INR25 billion (€411.4 million; $542.5 million) by issuing tax-free infrastructure bonds to investors in 2011, the group’s chief financial officer (CFO) told Infrastructure Investor.

“IDFC is one of the eligible entities who can raise tax-free bonds. We will conform to the norms set by Reserve Bank of India (RBI) while issuing these bonds,” said L.K Narayan, CFO of IDFC.

He added that the bonds will be issued for a period of ten years and the funds raised will be used for the company’s basic objective of lending to infrastructure projects such as energy and transportation, including roads. Further details of the bonds are expected to be announced in the next three to four weeks.

Recently, the Indian government announced its plans to issue tax-free infrastructure bonds through IDFC, Industrial Finance Corporation of India, Life Insurance Corporation, and a Non-Banking Finance Company classified as an Infrastructure Finance Company by the Reserve Bank of India (RBI), according to norms set by RBI.

The number of bonds issued by any company has been restricted by the RBI to 25 percent of the incremental infrastructure investments made by the issuer during 2009-10.

The bonds, with a minimum tenure of 10 years, have the potential to raise about $6.5 billion in 2010/11. The purpose of the funds is to encourage investment and bridge the gap in India’s infrastructure sector.

India has targeted an ambitious $500 billion of infrastructure investment in its five-year plan to 2012 and $1 trillion by the end of 2017. It is looking for heavy private investment in order to reach these targets.