REC Public Issue of Tax Free Bonds

Transcription

1 HI GHLI GHTS OF TAX BENEFI TS RURAL ELECTRI FI CATI ON CORPORATI ON LI MI TED ( A Government of I ndia Undertaking) I nterest from these Bonds do not form part of Total I ncome as per provisions under section 10 ( 15) ( iv) ( h) of the I ncome Tax Act, 1961 read along with Section 14 A( 1) of the I ncome Tax Act, Since the interest income on these bonds is exempt from tax, no Tax Deduction at Source ( TDS ) is required. However interest on application money would be liable for TDS as well as tax as per present tax laws. Wealth tax has been abolished w.e.f. financial year , i.e., assessment year COMPANY PROFI LE Notified as a public financial institution under Section 2 (72) of the Companies Act. Engaged in the financing and promotion of transmission, distribution and generation including renewable projects throughout India REC is one of only 17 Indian public sector undertakings to be granted Navratna status by the Department of Public Enterprise by virtue of its operational efficiency and financial strength GoI has rated RECs performance as Excellent continuously since Fiscal Registered as a Non Deposit taking NBFC with Reserve Bank of India. RBI has further categorized REC as an IFC (Infrastructure Finance Company) 60.64% shareholding held by Government of India as on September 30, 2015 CRI SI L AAA/ Stable by CRI SI L Limited, CARE AAA by Credit Analysis & Research Limited ( CARE ), IND AAA/ Stable by India Ratings and Research Private Limited ( I RRPL ) and [ I CRA] AAA by I CRA Limited. REC s loan assets have grown at a CAGR of % from Rs 81, crore in Fiscal 2011 to Rs 179, crore in Fiscal 2015 as per its standalone financial statements. REC s yearly loan disbursements have grown from Rs 24, crore in Fiscal 2011 to Rs 42, crore in Fiscal As on March 31, 2015, REC had total loan assets of Rs 1,79, crores and a net worth of Rs 24, crores as per its standalone financial statement. REC s profit after tax as per its standalone financial statements for Fiscal 2011, 2012, 2013, 2014 and 2015 was Rs 2, crore, Rs 2, crore, Rs 3, crore, Rs 4, crore and Rs 5, crore, respectively.

2 SALI ENT FEATURES OF THE PROPOSED TAX FREE BONDS Tax benefits u/ s 10 (15) (iv) (h) of the Income Tax Act, 1961 interest on these Bonds shall not form part of Total Income. Credit Ratings of CRI SI L AAA/ Stable by CRI SI L, CARE AAA by CARE, [ I CRA] AAA by I CRA Limited & IND AAA/ Stable by India Ratings and Research Private Limited ("I RRPL") indicating Highest Degree of Safety in terms of timely servicing of financial obligations. Bonds to be allotted in dematerialized form as well as in physical form but traded in dematerialized form only. Strengths Bonds are proposed to be listed on the BSE. REC s financial position is strong and the business is profitable REC has operated its financing business profitably for fifteen consecutive years, including a profit after tax on standalone basis of Rs 4, crore for Fiscal 2014 and Rs 5, crore for Fiscal REC has paid dividends each year since Fiscal As on March 31, 2015, company had a net worth of Rs 24, crore as per its standalone financial statement. Company s annualised return on average net worth for March 31, 2015 was % as per its standalone financial statement. Uniquely positioned to access and appraise borrowers in the I ndian power sector REC has been involved in Indian power sector finance since 1969 and was the first financial institution to exclusively focus on financing the Indian power sector. With a network of 18 project offices and 2 sub offices spread across India, REC s project offices play a critical role in the development of relationship with its clients, operation and promotion of its business and loan appraisal, loan sanctioning and post sanction monitoring processes. Occupies a key strategic position in the GoI 's plans for growth of the power sector REC is one of the limited number of government-owned companies that focus exclusively on financing the development of the power sector in India. The company has consistently benefited from the GoI 's power infrastructure plans since 1969 and the GoI has ensured REC s mandate has evolved in accordance with the development priorities. Experienced management team with sector expertise The company is managed by a team of experienced and highly qualified professionals. REC s key managerial personnel have an established track record in managing public financial institutions in India and bear a considerable knowledge of the power sector in India with most of its key managerial personnel having over 30 years of relevant experience in India and have been employed with prominent companies in the power sector.

3 I ssue Structure I ssuer I ssue of Bonds Rural Electrification Corporation Limited Public issue by Rural Electrification Corporation Limited ( REC or Issuer or the Company ) of tax free secured redeemable non convertible bonds of face value of Rs.1000 each in the nature of debentures having tax benefits under section 10 (15)(iv)(h) of the Income Tax Act, 1961, as amended ( Income Tax Act ). This tranche issue by the Issuer is of bonds for an amount of Rs.300 crore ( Base ) with an option to retain oversubscription of upto Rs.400 crore aggregating upto Rs.700 crore ( Tranche I Issue ) Nature of I nstrument Mode of I ssue Listing Credit Ratings I nterest payment date Secured redeemable non-convertible bonds Public Issue BSE. BSE shall be the Designated Stock Exchange for the Issue. The Bonds are proposed to be listed within 12 Working Days from the respective Tranche Issue Closing Date. CRI SI L AAA/ Stable by CRI SI L, CARE AAA by CARE, IND AAA/ Stable by India Ratings and Research Private Limited ("I RRPL"), [ I CRA] AAA by I CRA Limited. December 1 of every year Lead Managers to the I ssue AK Capital Services Limited, Edelweiss Financial Services Limited and RR Investors Capital Services Private Limited. I nterest on Application money used towards Allotment of Bonds At the rate of 6.89 % p.a., 7.09 % p.a. and 7.18 % p.a. on Tranche I Series 1A,Tranche I Series 2A and Tranche I Series 3A respectively for Allottees under Category I, Category I I and Category I I I Portion, and at the rate of 7.14 % p.a., 7.34 % p.a. and 7.43 % p.a. on Tranche I Series 1B, Tranche I Series 2B and Tranche I Series 3B respectively for Allottees under Category IV Portion. I nterest on Application money received which are liable to be refunded At the rate of 5% p.a. Such interest shall be paid along with the monies liable to be refunded. Interest warrant will be dispatched/ credited (in case of electronic payment) along with the Letter(s) of Refund at the sole risk of the Applicant, to the sole/ first Applicant. I ssue Price Rs. 1,000 per Bond. Put/ Call There is no put/ call option for the Bonds. Minimum Application Size 5 Bonds (Rs 5000) and multiples of 1 Bond (Rs 1000) thereafter Tranche I ssue Opening Date October 27, Tranche I ssue Closing Date November 4, Mode of Allotment In dematerialised or physical form, at the option of Applicants. Depositories NSDL and CDSL Trustee SBI Cap Trustee Company Ltd.

4 Options I ssue Terms Series of Bonds* For Category I, II & III # Tranche I Series 1A Tranche I Series 2A Tranche I Series 3A Coupon rate (%) p.a. 6.89% 7.09% 7.18% Annualised yield (%) p.a. 6.89% 7.09% 7.18% For Category IV only # Tranche I Series 1B Tranche I Series 2B Tranche I Series 3B Coupon rate (%) p.a. 7.14% 7.34% 7.43% Annualised yield (%) p.a. 7.14% 7.34% 7.43% For Category I, II, III # and IV # Frequency of interest payment Annual Annual Annual Minimum Application size 5 Bonds (Rs 5,000) 5 Bonds (Rs 5,000) 5 Bonds (Rs 5,000) In multiples of In the multiple of One Bond (Rs 1,000) thereafter In the multiple of One Bond (Rs 1,000) thereafter In the multiple of One Bond (Rs 1,000) thereafter Face value Rs 1,000 per Bond. Rs 1,000 per Bond. Rs 1,000 per Bond. Issue price Rs 1,000 per Bond. Rs 1,000 per Bond. Rs 1,000 per Bond. Tenor 10 years. 15 years. 20 years. Coupon Type Fixed coupon rate Fixed coupon rate Fixed coupon rate Redemption Date 10 years from the Deemed Date of Allotment. 15 years from the Deemed Date of Allotment. 20 years from the Deemed Date of Allotment. Redemption Amount (Rs./Bond) Repayment of the face value along with any interest that may have accrued at the Redemption Date. Repayment of the face value along with any interest that may have accrued at the Redemption Date. Repayment of the face value along with any interest that may have accrued at the Redemption Date. * The Company shall allocate and allot Tranche I Series 1A/ Series 1B (depending upon the category of applicants) to all valid applications, wherein the Applicants have not indicated their choice of the relevant Series of Bond. # In pursuance of CBDT Notification and for avoidance of doubts, it is clarified as under: a. The coupon rates indicated under Tranche I Series 1B, Tranche I Series 2B and Tranche I Series 3B shall be payable only on the Portion of Bonds allotted to RIIs in the Issue. Such coupon is payable only if on the Record Date for payment of interest, the Bonds are held by investors falling under RII Category viz Category IV. b. In case the Bonds allotted against Tranche I Series 1B, Tranche I Series 2B and Tranche I Series 3B are transferred by RIIs to Non-RIIs viz, Institutions, Corporates and/ or High Networth Individuals, the coupon rate on such Bonds shall stand at par with coupon rate applicable on Tranche I Series 1A, Tranche I Series 2A and Tranche I Series 3A respectively. c. I f the Bonds allotted against Tranche I Series 1B, Tranche I Series 2B and Tranche I Series 3B are sold/ transferred by the RIIs to investor(s) who fall under the RII category as on the Record Date for payment of interest, then the coupon rates on such Bonds shall remain unchanged; d. Bonds allotted against Tranche I Series 1B, Tranche I Series 2B and Tranche I Series 3B shall continue to carry the specified coupon rate if on the Record Date for payment of interest, such Bonds are held by investors falling under RII Category; e. I f on any Record Date, the original RII allotee(s)/ transferee(s) hold the Bonds under Tranche I Series 1B, Tranche I Series 2B, Tranche I Series 3B, Tranche I Series 1A, Tranche I Series 2A and Tranche I Series 3A for an aggregate face value amount of over Rs 10 lacs, then the coupon rate applicable to such RII allottee(s)/ transferee(s) on Bonds under Tranche I Series 1B, Tranche I Series 2B, Tranche I Series 3B shall stand at par with coupon rate applicable on Tranche I Series 1A, Tranche I Series 2A and Tranche I Series 3A respectively; f. Bonds allotted under Tranche I Series 1A, Tranche I Series 2A and Tranche I Series 3A shall carry coupon rates indicated above till the respective maturity of Bonds irrespective of Category of holder(s) of such Bonds; g. For the purpose of classification and verification of status of the RII Category of Bondholders, the aggregate face value of Bonds held by the Bondholders in all the Series of Bonds allotted under the Tranche I Issue shall be clubbed and taken together on the basis of PAN. Participation by any of the Investor classes in the Tranche I Issue will be subject to applicable statutory and/or regulatory requirements, Applications made by them should not exceed the investment limits or maximum number of Bonds that can be held under applicable statutory and/or regulatory provisions.

5 Who can apply? Category I Category I I Category I I I Category I V I nstitutions * Corporates * High Net worth I ndividuals ( HNI s ) Retail I ndividual I nvestors ( RI I s ) Public financial institutions, scheduled commercial banks, resident multilateral and bilateral development financial institutions, state industrial development corporations; Provident funds and pension funds with minimum corpus of ` 25 crore ; Insurance companies registered with the IRDA; National Investment Fund set up by resolution no. F. No. 2/ 3/ 2005-DDII dated November 23, 2005 of the Government of India published in the Gazette of India; Insurance funds set up and managed by the army, navy or air force of the Union of India or set up and managed by the Department of Posts, India; Mutual funds registered with SEBI; and Resident Alternative Investment Funds and Venture Capital Funds registered with SEBI, subject to investment conditions applicable to them. Companies within the meaning of section 2(20) of the Companies Act; Statutory bodies/ corporations; Cooperative banks; Trusts including Public/ private charitable/ religious trusts; Limited liability partnerships; Partnership firms in the name of the respective partners; Regional rural banks; Societies registered under the applicable law in India; Association of persons; and Other legal entities, subject to compliance with their respective applicable legislations. which are authorized to invest in the Issue. The following Investors applying for an amount aggregating to above Rs10 lakhs across all Series of Bonds in each Tranche Issue: Resident Indian individuals; Hindu Undivided Families through the Karta; and Non Resident Indians on nonrepatriation basis only; The following Investors applying for an amount aggregating upto and including Rs 10 lakhs across all Series of Bonds in each Tranche Issue: Resident Indian individuals; Hindu Undivided Families through the Karta; and Non Resident Indians on non-repatriation basis only; which are aut horized t o invest in t he I ssue * With regard to Section 186( 7) of the Companies Act, 2013, see general circular( No. 6/ 2015), dated April 9, 2015 issued by the MCA clarifying that in cases where the effective yield ( effective rate of return) on tax free bonds is greater than the prevailing yield of one year, three year, five year or ten year government security closest to the tenor of the loan, there is no violation of Section 186( 7) of the Companies Act, 2013.

6 Applications cannot be made by: a) Minors without a guardian name (A guardian may apply on behalf of a minor. However, Applications by minors must be made through Application Forms that contain the names of both the minor Applicant and the guardian); b) Foreign nationals (including FIIs, FPI s, Qualified Foreign Investors), and NRI s applying on repatriation basis; c) NRI s who are (i) based in the USA, and/ or, (ii) domiciled in the USA, and/ or, (iii) residents/ citizens of the USA, and/ or, (iv) subject to any taxation laws of the USA; d) Foreign Venture Capital Investor; e) Overseas Corporate Bodies; and f) Person ineligible to contract under applicable statutory/ regulatory requirements. g) Any other category of Applicants not provided for under I ssue Procedure Who are eligible to apply? of the Prospectus Tranche I Allocation Ratio Particulars I nstitutions Corporates High Networth I ndividuals ( HNI s ) Retail I ndividual I nvestors ( RI I s ) Portion Institutional Portion Corporate Portion HNI Portion Retail Portion Size in % 10% of the 25% of the 25% of the 40% of the UNDERSUBSCRI PTI ON I N ANY PORTI ON I f there is any under subscription in any Portion the spill over to shall be in the following order: Category IV Portion; Category I I I Portion; Category I I Portion; and Category I Portion. ALLOTMENTS I N CASE OF OVERSUBSCRI PTI ON I N ANY PORTI ON In case of an oversubscription in any of the Portions, Allotments to the maximum extent, as possible, will be made on a first-come first-serve basis and thereafter on proportionate basis, i.e. full Allotment of Bonds to the Applicants on a first come first basis up to the date falling 1 (one) day prior to the date of oversubscription and proportionate allotment of Bonds to the Applicants on the date of oversubscription SUBMI SSI ON OF COMPLETED APPLI CATI ON FORMS Mode of Submission of Application Forms Direct Online Applications ASBA Applications To whom the Application Form has to be submitted Online submission through the online platform and Online Payment Facility offered by stock exchange(s). (i)if using physical Application Form, (a) to the Members of the Syndicate or Trading Members of the stock exchange(s) only at the Specified Cities ( Syndicate ASBA ), or (b) to the Designated Branches of the SCSBs where the ASBA Account is maintained; or (ii)i f using online Application Form, to the SCSBs, electronically through internet banking facility, if available. Non-ASBA Applications (other than Direct Online The Members of the Syndicate or Trading Members of the stock exchange(s) at the centres mentioned in the Applications) Application Form. Note: Application for allotment in physical form can be made only using Non-ASBA Applications (other than Direct Online Applications).

7 FI NANCI AL HI GHLI GHTS As on/for the year (Rs. Crs) 31-Mar Mar Mar Mar Mar-15 Shareholder's Fund 12, , , , , Long-term Borrowings 61, , , , , Short-term Borrowings , , , Long-term Loans & Advances 73, , ,14, , , Cash & Cash Equivalents 2, , , Short-term Loans & Advances 1, , , , Revenue from Operations 8, , , , , Total Expenses 5, , , , , Profit before Prior Period Items & Tax 3, , , , , Profit before Tax 3, , , , , Profit for the period from Continuing Operations 2, , , , , Gross NPA 0.38% 0.33% 0.74% Net NPA 0.31% 0.24% 0.54% Return on Net worth (average) 23.85% 24.57% 23.11% Net interest margin 4.55% 4.90% 5.01%