Ennore Port Ltd Tax Free Bonds – March 2013 – Review

A lot of companies like REC, IRFC, PFC  and HUDCO have their tranche – II of Tax free bonds open for subscription. A lesser known company Ennore Port Ltd too have come with their tax free bonds. Here are the details

Ennore Port Ltd Tax Free Bonds – Significant Points:

• Offer Period: February 28 – March 15, 2013 (the offer can be pre-closed on full subscription)
• Annual Interest Rates for Retail Investors:
  • 7.51% for 10 Years
  • 7.67% for 15 Years
  • The interest rates are 0.5% less for HNIs, QIBs and corporate subscribers.
• Price of each bond: Rs 1,000
• Minimum Investment: 5 Bonds (Rs 5,000)
• Max Investment Limit for Retail Investor: Rs 10 Lakhs
• Reservation: 40% reserved for retail investors
• Rating: CRISIL AA-/Stable, CARE AA-, BWR AA+
• Allotment: First Come First Serve
• Listing: Bonds would be listed on BSE and will entail capital gains tax on exit through secondary market
• You can apply for these bonds in the Demat or the physical format, but for trading you need to have them in the Dematerialized format.
• Step Down Clause: The bonds will come with a step-down clause, according to which only the original allottee, who has subscribed under the retail category will receive the coupon of 7.51% – 7.67% depending on tenure. On sale or transfer, the benefit is lost and rates reduce to that applicable for other investors (7.01% for 10-year bonds and 7.17% for 15-year bonds).

Why you should invest?

1. The bonds are secured to the full extent and Ennore Port Ltd is a Government of India undertaking.
2. The interest rates on future tax free bonds might be lower as RBI might moderate its policy rates further
3. Reduction in interest rates would means an increase in the price of bonds thus giving capital gains

Why you should not invest?

1. The interest rate offered by PPF is 8.8% tax free. You should exhaust your maximum PPF limit of Rs. 1 Lakh before you look for tax free bonds
2. Even if you want to invest in Tax Free Bonds – HUDCO Tax Free Bonds are better option. They are more known company, have a better credit rating and still offering 2 basis points higher interest rates.
3. If you are not in higher tax slab of 20% or more
4. These bonds don’t make much sense for NRIs as they can get better returns on NRE fixed deposits with banks that offer rates of around 9 per cent, tax-free

Ennore Port Ltd Tax Free Bonds – Who should apply?

As I said above, I don’t know why anyone should opt for these bonds. HUDCO Tax Free Bonds are better option. They are more known company, have a better credit rating and still offering 2 basis points higher interest rates.

About Ennore Port Ltd:

Ennore Port Limited is a Govt. of India undertaking with a Mini Ratna category I status. It is incorporated as a company in October, 1999 under the Companies Act, 1956, and is the first corporatized major port in the country and 12th major port in India. It functions on the Landlord Port Model basis whereby the port constitutes a landlord, which manages the basic port assets by leasing land and basic infrastructure to port operators.

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