State-owned Nabard will this week tap the public market with a Rs 3,500-crore tax-free bond issue.
Nearly 60 per cent amounting to Rs 2,100 crore would be allocated to retail investors investing up to Rs 10 lakh, sources said.
The balance Rs 1,400 crore will be mobilised from qualified institutional buyers (QIBs), corporates and high networth individuals.
Tax-free bonds with tenors of 10 years and 15 years are proposed to be issued and the funds raised are expected to be used to finance irrigation projects. For retail investors, the coupon rates for the 10-year bond is expected to be 7.29 per cent. The coupon on the 15-year bond is likely to be pegged at 7.64 per cent.
In the case of non-retail investors, the coupon rate on the 10-year bond is 7.04 per cent and 7.35 per cent in the case of the 15-year bond.
The Central Board of Direct Taxes (CBDT) had on February 16 permitted Nabard to issue tax-free bonds to the tune of Rs 5,000 crore during 2015-16. Of this, Nabard has mobilised Rs 1,500 crore through private placement from institutional investors.
Nabard is AAA rated by Crisil and India Ratings, which assures highest safety for the capital and regular interest payments. The proposed tax-free bonds are to be listed on the Bombay Stock Exchange.