About 80 per cent of this issue is reserved for retail and rich investors. Investments can be made in this issue till January 29.
Mumbai: Power Finance Corporation (PFC) will start selling bonds to retail investors on Friday. On this, you will get 7.5 percent return. The company will raise Rs 5,000 crore from this bond issue.
Investments can be made till 29 January
This is the first public bond issue of this kind. About a decade ago, State Bank of India introduced such a bond issue. About 80 per cent of this issue is reserved for retail and rich investors. Investments can be made in this issue till January 29.
PFC’s bond issue is being seen as an alternative to fixed deposits of banks. These bonds are available in four categories of maturity. Investors can withdraw their investments ahead of time through the secondary market. PFC is a government company.
Four options of maturity
Ajay Mungalunia, managing director (fixed income), JM Financial, said, “After a long time, retail bonds are back in the market. It has the support of the government. PFC bonds have many options. To deal with interest rate risk The floating rate options are good for retail investors. ”
JM Financial, Trust Capital, AK Capital and Edelweiss are helping PFC in this bond issue. This bond has the option of three years, five years, ten years and 15 years for maturity. The coupon (interest rate) is between 4.65 to 7.15 percent. There is an option to take interest on quarterly or yearly basis. Returns will be reduced after adjusting the income tax slab related to the investor.
You will get more interest from bank FD
In floating rate, the investor can get 0.80 percent more interest than the government bond yield. This is also an option for institutions, but they will get 0.55 per cent more interest than bond yield. Its upper limit in floating rate calculation will be 7.5 percent. The interest paid to the retail investor will be at least 6 percent.
The interest income for the person falling under the highest slab (about 30 per cent) of income tax will not be less than 4.2 per cent. In comparison, a common investor will get about 3.78 percent interest on holding a fixed deposit of State Bank of India for 10 years.
Vikram Dalal, founder of Synergy Capital, said, “These bonds are safe. The risk is low. Investors can invest in this bank given the declining interest rate on fixed deposits. This will give them good interest income. But, investors are very Don’t invest too much because interest rates are expected to rise in the coming times. ”