NHAI bonds gain 3pc on opening

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The tax-free bonds of the National Highways Authority of India (NHAI) made a strong entrance on the markets on Wednesday. After opening at Rs 1,030, the 10-year bond closed with gains of Rs 28.21, or 2.82 per cent to Rs 1,028.21. Meanwhile, the 15-year bond closed at Rs 1,035.03, up Rs 35.03, or 3.50 per cent.

On a yield-to-maturity (YTM) basis, the 10-year bond is currently at 7.78 per cent as against its coupon of 8.20 per cent, while the 15-year bond is at 7.89 per cent versus a coupon rate 8.30 per cent.

The interest earned on such bonds is tax-free. However, short-term capital gains tax will be applicable as usual for investors who would have booked profits on Wednesday.

“Investors have made a stellar three per cent returns in less than a month by investing in these bonds,” added another banker who didn’t wish to be named. “Some of the mutual funds were seen buying aggressively on Wednesday to consolidate their holdings.”

The 10-year bond touched a high of Rs 1,035 and the 15-year bond touched a high of Rs 1043.4 on the National Stock Exchange (NSE). The 15-year bond witnessed high trading volume at Rs 418 crore, while the shorter tenure bond saw a turnover of about Rs 133 crore.

The issue had opened for subscription on December 28 and closed on January 6. The Rs 10,000-crore offering saw huge interest from high net worth individuals (HNI) and institutional investors.

The HNI category saw demand worth Rs 8,120 crore against Rs 3,000 crore of bonds on sale, while the institutional category saw demand for Rs 24,533 crore against the available Rs 4,000 crore. The remaining 30 per cent, or Rs 3,000 crore, meant for the retail investors, just managed to get full subscription.

After the success of NHAI, some other state-run companies, including Power Finance Corporation and Indian Railway Finance Corporation, also raised funds through similar tax-free bond issues. Investors looking to invest in such tax-free bonds through the primary market will get another chance when state-run REC launches its Rs 3,000-crore issue. The company’s offering is likely to hit the market later this month, subject to certain clearances.