The India Infrastructure Finance Company Ltd (IIFCL) is to begin issuing tax-free bonds as a way of luring more investments to the country's infrastructure sector.
The bonds, which will be open to both foreign and domestic investors will be issued until the end of March next year in a bid to try to generate extra revenue for the country's infrastructure sector. The bonds will have a similar rate of interest applied to them as the 8% given to 10-year government bond paper.
IIFCL will raise the capital using both public and private schemes. The tax-free bonds will have a 7.5% coupon rate, but an extra 1% will be applied during the re-structuring phases.
Sovereign guarantee status will be given to the tax-free bonds, at an annual 25 basis-point fee for the IIFCL.
It has been suggested by government officials that the duration of the bonds will be around ten years, to tie in with the length of time that most infrastructure projects tend to take.
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