National highways authority of India is planning to raise Rs 10,000 crore via tax free bonds that will hit the market on December 28. This is the first time the government has opened a special window for NHAI to raise funds by issuing tax-free bonds.
While the bond has received stable rating from top three agencies, mounting debt for NHAI could be a reason for worry.
The issue will open on December 28 and close by January 11, 2012. The bonds will have two maturity periods of 10 and 15 years with a coupon rate of 8.20 per cent and 8.30 per cent respectively. The bonds will be listed on the BSE and the National Stock Exchange.
As on June 30, 2011, NHAI's total debt (including secured loans) stood at Rs 6,636.21 crore.
But with the fresh borrowing, its debt to capital ratio will worsen from 0.11 to 0.29. The debt to capital ratio reflects the financing strength of a firm, higher the ratio, higher the company's debt compared to its equity. The bond issue has got AAA rating from the three agencies -- Crisil, CARE and Fitch.
Currently, NHAI raises funds from the market through issue of 54 EC bonds that give subscribers an exemption from capital gains tax.
Despite the market conditions, the lead managers are hopeful of a resounding response and the issue is likely to be folded by December 30, just three day after the issue opens.
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