Hudco issues tax free bonds, offers 7.34-8.01% coupon

Moneycontrol Bureau

State owned Housing and Urban Development Corporation (Hudco) is issuing tax free bonds with a face value of Rs 1,000 each to raise Rs 5,000 crore. Those secured redeemable non-convertible debentures are offering interest rates in the range of 7.34% - 8.01% per annum for the tenures of 10 and 15 years.

However, the core size of the issue is just at Rs 750 crore leaving a huge room for oversubscription of Rs 4,250 crore.

"If we cannot raise the sum in first tranche, we will go for the second tranche before March 31," said V P Baligar, CMD, Hudco.

"In 2011-12, our bonds were oversubscribed. So far in this year, we are offering the highest coupon rate wherein pre-tax yields are more than 11%. In our current issue, we have introduced a provision for NRI and FII for the first time. Moreover, bonds are tradable from the day one in NSE. Soon, we will get it listed in BSE as well."

Retail investors can subscribe the issue to tune of 40% of the total size. The minimum investment is Rs 5,000 (or five bonds) with an upper limit upto Rs 10 lakh. They can earn an additional interest of 50 basis points. A retail investor can get a coupon of 7.84% for 10 years and 8.01% for 15 years. The issue will open on January 9, 2013 and close on January 22, 2013. 

Not more than 10% of the overall issue size will be allocated to investors who are foreign institutional investors and eligible non-resident Indians.

In 2011-12, the outstanding loan book of the company stood at Rs 25,004 crore, wherein urban infrastructure credit sanctions formed around 69% and housing loans were at 31%. However, the rate of bad loans increased in 2012-13.  Net non-performing ratio rose to 4.66% for the quarter ended September 30, 2012 as against 1.44% in FY12. During the same period gross NPA ratio was at 9.55% compared with 6.07%.

"We aim to bring down the composition between urban infra and housing loans at 50:50 by 2020. Our NPAs are generally higher in the first half of the year while the rate of recovery goes up in the second half of the year. We expect net NPA ratio below 2% by March, 2013," Baligar said replying to a moneycontrol.com's query.

The company with "mini-navratna" status intends to use the issue proceeds for lending book expansion, working capital requirements and augmenting the capital. However, proceeds from FII and NRI are not supposed to be utilized in these purposes.