IREDA offers Tax Free, Secured, Redeemable Bonds of Rs. 1,000 each

India Renewable Energy Development Agency Limited has announced that it is proposing a public issue of tax free, secured, redeemable, non-convertible Bonds bonds of face value of Rs. 1,000 each (“Bonds”), in the nature of debentures, having benefits under section 10(15) (iv)(h) of the Income Tax Act 1961, for an amount of Rs. 1,000 crores (“Base Issue Size”) with an option to retain oversubscription up to Rs. 1,716 crores (“Shelf Limit”) (“Issue”) in fiscal 2016.

The interest income on bonds is exempted from levy of income tax in the hands of the investors as per the notification no. 59/2015 F. No. 178/27/2015-ITA-I dated July 6, 2015 issued by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India.

The Issue will open for subscription on January 8, 2016 and is scheduled to close on January 22, 2016 with an option for early closure. The Bonds are proposed to be listed on the BSE Limited (“BSE”) within 12 Working Days from the Issue Closure Date.

For Bondholders falling under Category I i.e. QIBs, Category II i.e. Domestic Corporates and Category III i.e. HNIs, the Bonds under Tranche –I, Series 1A, the Tranche -I Series 2A and the Tranche -I Series 3A shall carry interest at the coupon rate of 7.28% p.a., 7.49% p.a. and 7.43% p.a., for a tenor of 10 years, 15 years and 20 years respectively, payable annually from, and including, the Deemed Date of Allotment up to, but excluding, their respective Maturity Dates, payable on the “Interest Payment Date”, to the Bondholders as of the relevant Record Date. 

For Bondholders falling under Category IV i.e Retail Individual Investors, the Bonds under Tranche I Series 1B, the Tranche I Series 2B and the Tranche I Series 3B shall carry interest at the coupon rate of 7.53% p.a., 7.74% p.a. and 7.68% p.a., for a tenor of 10 years, 15 years and 20 years respectively, payable annually from, and including, the Deemed Date of Allotment up to, but excluding, their respective Maturity Dates, payable on the “Interest Payment Date”, to the Bondholders as of the relevant Record Date.

The minimum application size for the Issue is 5 Bonds (Rs. 5,000) (individually or collectively, across all Series of Bonds) and in the multiple of One Bond (Rs. 1,000) thereafter.

The Net Issue proceeds as raised through each of the Tranche(s) less the expenditure will be utilised for (a) the purpose of financing/ re-financing renewable energy and energy efficiency projects, augmenting the resource base/ setting up of renewable energy projects.: minimum 75% of the net amount raised and allotted in the Issue; and (b) for General Corporate purpose: upto 25% of the net amount raised and allotted in the Issue. The unutilized amount if any will be used for purpose of financing/ re-financing renewable energy and energy efficiency projects/augmenting the resource base/ setting up of renewable energy projects/repayment of loan.

The Issue is being made under the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, as amended (the “SEBI Debt Regulations”) and pursuant to Notification No. 59/2015 dated July 6, 2015 issued by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India (“CBDT Notification”), by virtue of powers conferred on it under section 10(15)(iv)(h) of the Income Tax Act, 1961, as amended (the “Income Tax Act”).

The Allotment of the Bonds shall be in dematerialized form or in physical form, as specified by the Applicant in the Application Form.

ICRA Limited has, vide its letter no. D/RAT/2015-16/124/1 dated September 18, 2015, assigned a credit rating of “[ICRA]AA+(pronounced as ICRA Double A Plus)” which is said to have a high degree of safety regarding timely servicing of financial obligations, indicating that such instruments carry very low credit risk. ICRA Limited has revalidated the said rating vide letters dated December 7, 2015 and December 30, 2015. The outlook on the long- term rating is “Stable”. India Ratings and Research Private Limited (formerly Fitch Ratings India Private Limited), has, vide its letter dated September 23, 2015 assigned a credit rating of “IND AA+/Stable” to the Bonds and revalidated the rating vide its letter dated December 7, 2015 and December 30, 2015. These ratings are not a recommendation to buy, sell or hold securities, and investors should take their own decision. These ratings are subject to revision or withdrawal at any time by the assigning rating agency(ies) and should be evaluated independently of any other ratings.

The Lead Managers to the Issue are Karvy Investor Services Limited, A K Capital Services Limited, Edelweiss Financial Services Limited, IDBI Capital Market Services Private Limited and RR Investors Capital Services Private Limited. The Debenture Trustee for the Bondholders is IL&FS Trust Company Limited. Dhir & Dhir Associates, Advocates and Solicitors acted as the Legal Counsel to the Issue.