National Housing Bank raises Rs 644 crore thru tax-free bonds

NEW DELHI, MARCH 31:  

National Housing Bank has mobilised Rs 644 crore from its recently concluded tax-free bonds issue, its Chairman and Managing Director, R.V.Verma has said.

As much as Rs 198 crore — out of this overall amount of Rs 644 crore — came from retail individual investors. The remaining came from institutional investors.

NHB could have raised more funds if more time was on its side, Verma said, adding that the recent public offering was open only for five days.

“There was a good market for retail. We did not get enough time to market the retail issue”.

The softening of G-sec yields in the run up to the issue also did not help as it impacted the pricing of the tax–free bonds, Verma noted.

The Centre had allowed NHB to raise Rs 5,000 crore through tax free bonds during 2012-13.

It had room to mobilise upto Rs 3,750 crore through the recently concluded public issue.

Another factor which could have impacted tax free bond issues this fiscal, including the recent NHB issue, is the delayed clarification from the corporate affairs ministry.

Currently, the Companies Act forbids companies from lending to any corporate at a rate of interest lower than the prevailing “bank rate” specified by the Reserve Bank of India.

Most of the tax free bond issues came in at interest yield of 6.5-7.5 per cent.

The Corporate Affairs Ministry on March 13 clarified that in cases where the effective yield on tax free bonds is greater than the prevailing bank rate, there is then no violation of Companies Act.

This comfort came a little late in the day, rued many issuers of tax free bonds.