Authorised Entities who can issue tax-free, secured, redeemable, non-convertible bonds during the F/Y 2015–16

Autho­rised enti­ties under Sec­tion 10(15)(iv)(h) of the Income Tax Act, 1961 — To issue tax-free, secured, redeemable, non-con­vert­ible bonds dur­ing the f.y. 2015–16. — 59/2015 — Dat­ed 6–7‑2015 — Income Tax

S.O.  (E) : In exer­cise of the pow­ers con­ferred by item (h) of sub-clause (iv) of clause (15) of sec­tion 10 of the Income-tax Act, 1961 (43 of 1961), the Cen­tral Gov­ern­ment here­by autho­ris­es the enti­ties men­tioned in col­umn (2) of the Table giv­en below, to issue, tax- free,  secured, redeemable, non-con­vert­ible bonds dur­ing the finan­cial year 2015–16,  aggre­gat­ing to  amounts  men­tioned in  col­umn  (3)  of the  said  table,  sub­ject to  the  con­di­tions, namely :-

CONDITIONS

1.  Eli­gi­bil­i­ty — The fol­low­ing shall be eli­gi­ble to sub­scribe to the bonds:-

(i) Retail Indi­vid­ual Investors (RIIs);

(ii) Qual­i­fied Insti­tu­tion­al Buy­ers (QIBs);

(iii) cor­po­rates (includ­ing statu­to­ry cor­po­ra­tions),  trusts,  part­ner­ship firms, Lim­it­ed Lia­bil­i­ty Part­ner­ships, co-oper­a­tive banks, region­al rur­al banks and oth­er legal enti­ties, sub­ject to com­pli­ance with their respec­tive Acts; and

(iv) High Net­worth Indi­vid­u­als (HNIs).

2. Tenure of bonds - The tenure of the bonds shall be for ten or fif­teen or twen­ty years.

3. Per­ma­nent Account Num­ber - It shall be manda­to­ry for the sub­scribers to  fur­nish their Per­ma­nent Account Num­ber to the issuer of the bonds.

4. Rate of interest -

(i) There shall be a ceil­ing on the coupon rates based on the ref­er­ence Gov­ern­ment secu­ri­ty (G‑sec) rate;

(ii) the ref­er­ence G‑sec rate shall be the aver­age of the base yield of G‑sec for  equiv­a­lent matu­ri­ty report­ed by Fixed Income Mon­ey Mar­ket and Deriv­a­tive  Asso­ci­a­tion of India (FIMMDA) on a dai­ly basis (work­ing day) pre­vail­ing for  two weeks end­ing on the Fri­day imme­di­ate­ly pre­ced­ing the fil­ing, of the final  prospec­tus with the Exchange or Reg­is­trar of Com­pa­nies (ROC) in case of  pub­lic issue and the Issue open­ing date in case of pri­vate placement;

(iii) the ceil­ing coupon rate for AAA rat­ed issuers shall be the ref­er­ence G‑sec  rate less fifty five basis points in case of RIIs and ref­er­ence G‑sec rate less  eighty basis points in case of oth­er investor seg­ments referred to at (ii), (iii) & (iv) of para­graph 1 above;

(iv) in case the rat­ing of the issuer enti­ty is AA+, the ceil­ing rate shall be ten  basis  points above the ceil­ing rate for AAA rat­ed enti­ties [as giv­en in clause(iii) ];

(v) in case the rat­ing of the issuer enti­ty  is AA or AA‑, the ceil­ing rate shall be twen­ty basis points above the ceil­ing   rate for AAA rat­ed enti­ties [as giv­en in cIause (iii)];

(vi)  these ceil­ing rates shall apply,  for annu­al pay­ment of inter­est and in case  the sched­ule of inter­est pay­ments is altered to semi-annu­al, the inter­est  rates shall be reduced by fif­teen basis points;

(vii) the high­er rate of inter­est, applic­a­ble to RIIs, shall not be avail­able in case  the bonds are trans­ferred by RIIs to non retail investors.

5.  Issue expense and brokerage -

(i) In the case of pri­vate place­ment, the total issue expense shall not exceed 0.25 per cent of the issue size and in case of pub­lic issue it shall not exceed0.65 per cent of the issue size;

(ii) the issue expense would include all  expens­es relat­ing to  the issue like bro­ker­age, adver­tise­ment, print­ing, reg­is­tra­tion etc.

6. Pub­lic issue -

(i) At least sev­en­ty per cent of the aggre­gate amount of bonds issued by each enti­ty shall be raised through pub­lic issue;

(ii) forty per cent of such pub­lic issue shall be ear­marked for RIIs.

7.  Pri­vate placement -

(i) While adopt­ing the pri­vate place­ment route to issue the bonds, each enti­ty shall adopt the book build­ing approach as per reg­u­la­tion  11  of the Secu­ri­ties and Exchange Board of India (Issue and List­ing of Debt Secu­ri­ties) Reg­u­la­tions, 2008, where­in bids shall be sought on the coupon rate sub­ject to a ceil­ing spec­i­fied by the enti­ty and the allot­ment shall be made at the price bid;

(ii) the bonds shall be paid for and issued at a pre­mi­um with a fixed coupon, to facil­i­tate trad­ing of the instru­ment under a sin­gle Inter­na­tion­al  Secu­ri­ties Iden­ti­fi­ca­tion Num­ber (ISIN) and the yield shall be com­put­ed based on the price quot­ed and allot­ment shall be done for best price (low­est yield) thereof;

(iii) the ceil­ing rate of the inter­est shall either be equal to or low­er than the rate men­tioned in para­graph 4 above;

(iv) while call­ing for bids, there shall be no lim­it on the num­ber of arrangers who can bid for the issue.

8. Repay­ment of bonds

(i) The issuer enti­ty shall sub­mit a financ­ing plan to the Min­istry of Finance to  demon­strate its abil­i­ty to repay the bor­rowed funds on the repay­ment  becom­ing due;

(ii) the financ­ing plan referred in sub-para­graph  (i) shall be sub­mit­ted to the Infra-Finance Sec­tion, Infra­struc­ture Divi­sion, Depart­ment of Eco­nom­ic Affairs, Min­istry of Finance, with­in three months of clo­sure of the issue, duly sup­port­ed by a res­o­lu­tion of the respec­tive enti­ty’s Board of Directors.

9. Selec­tion of mer­chant bankers -

(i) Mer­chant bankers shall be select­ed through com­pet­i­tive bid­ding process with trans­par­ent pre-qual­i­fi­ca­tion cri­te­ria and the final selec­tion shall be based on finan­cial bids;

(ii) the ben­e­fit under sec­tion 10 of the Income-tax Act, 1961 (43 of 1961) shall be admis­si­ble only if the hold­er of such bonds reg­is­ters his/ her or its name and the hold­ing with the entity.

(iii) the issue of bonds shall be made in com­pli­ance with the pub­lic issue require­ments spec­i­fied in the Com­pa­nies Act, 2013 and Secu­ri­ties and Exchange  Board  of  India (Issue   and  List­ing  of  Debt  Secu­ri­ties), Reg­u­la­tions, 2008, includ­ing inter-alia the fil­ing of a prospec­tus with the Reg­is­trar of Com­pa­nies, as applicable.

TABLE

Sl. No.	Enti­ties	Allo­cat­ed   amount of bonds (Rs. in Crore)
(1)	(2)	(3)
1	Nation­al High­ways Author­i­ty of India (NHAI)	24000
2	Indi­an Rail­ways Finance Cor­po­ra­tion (IRFC)	6000
3	Hous­ing and Urban Devel­op­ment Cor­po­ra­tion (HUDCO)	5000
4	Indi­an Renew­able Ener­gy Devel­op­ment Agency (IREDA)	2000
5	Pow­er Finance Cor­po­ra­tion Lim­it­ed (PFC)	1000
6	Rur­al Elec­tri­fi­ca­tion Cor­po­ra­tion Lim­it­ed (REC)	1000
7	NTPC Lim­it­ed	1000

Expla­na­tion: — For the pur­pos­es of this notification,

(i) Qual­i­fied Insti­tu­tion­al Buy­ers shall have the same mean­ing as assigned to them in the Secu­ri­ties and Exchange Board of India (Dis­clo­sure and Investor Pro­tec­tion) Guide­lines, 2000.

(ii)  Retail indi­vid­ual Investors means those indi­vid­ual investors, Hin­du Undi­vid­ed  Fam­i­ly (through Kar­ta ), and Non Res­i­dent Indi­ans (NRIs), on repa­tri­a­tion as well as non repa­tri­a­tion basis, apply­ing for upto rupees ten lakhs in each issue  and indi­vid­ual investors invest­ing more than rupees ten lakhs shall be clas­si­fied as High Net Worth Individuals.

(iii)  The bonds issued to NRIs shall be sub­ject to the pro­vi­sions of noti­fi­ca­tion num­ber FEMA 4/2000-RB, dat­ed the 3td May, 2000 and noti­fi­ca­tion num­ber FEMA 20/2000-RB dat­ed the 3rd May, 2000, issued under clause (b) of sub­sec­tion (3) of sec­tions 6 and 47 of the For­eign Exchange Man­age­ment Act, 1999 (42 of 1999), as amend­ed from time to time.

(iv)  The cred­it rat­ing referred to in para­graph 4 of this noti­fi­ca­tion shall mean the cred­it rat­ing, as assigned by a cred­it rat­ing agency which is approved by the Secu­ri­ties and Exchange Board of India as well as the Reserve Bank of India and where an enti­ty has been rat­ed dif­fer­ent­ly by more than one rat­ing agency, the low­er of the two rat­ings shall be considered.

[F.No.178/ 27/2015-ITA‑I]

(DEEPSHKHA SHARMA)

Direc­tor to the Gov­ern­ment of India