REC to raise additional Rs 50 billion via zero-coupon bonds

13 Nov 2024 CW Team

State-owned REC Ltd is planning to secure another Rs 50 billion in FY25 by issuing deep-discount zero-coupon bonds, according to sources. This follows its recent Rs 50 billion fundraising on September 30 through CBDT-notified zero-coupon bonds, which offered an effective yield of 6.25% per annum. The issue was oversubscribed by nearly seven times, with bids totaling Rs 336.7 billion against a Rs 50 billion offering, which included a base size of Rs 10 billion and a Rs 40 billion greenshoe option.

Zero-coupon bonds, issued at a deep discount and redeemed at face value, offer tax advantages with redemption classified as long-term capital gains, taxed at 12.5% due to the CBDT notification. Unlike regular bonds, they do not provide periodic interest, reducing reinvestment risk for investors.

REC also recently raised Rs 30 billion through 15-year bonds at 7.09%, marking the first long-tenure issuance by a ‘AAA’-rated entity in years, which attracted strong demand from insurers and pension funds. Additionally, it issued Rs 29.01 billion in 5-year bonds at 7.34%.

REC, a 'Maharatna' NBFC under India’s Ministry of Power, finances infrastructure projects nationwide. Separately, Indian Railway Finance Corporation (IRFC) is seeking Rs 30 billion in domestic bonds with a 15-year maturity, rated ‘AAA’ by Icra, Crisil, and Care.

(Business Standard)

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