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  • Writer's pictureRomik Rai

IREDA tax free NCDs

Updated: Jan 18, 2020

Indian Renewable Energy Development Agency Limited (A Government of India enterprise)

Instrument: Exchange traded (tax free) non-convertible debentures

NSE Symbol: IREDA ISIN: INE202E07153

Series: N6 Coupon Rate: 8.8 %

Issue date: 13-Mar-2014 Maturity Date: 20-Mar-2034

Face value: INR1,000 Bond Type: Regular

Next IP Date: 20-Mar-2017 Credit Rating: AAA

Profile of IREDA

Indian Renewable Energy Development Agency Limited (IREDA) is a wholly-owned government of India (GoI) enterprise and operates under the administrative control of the Ministry of New & Renewable Energy (MNRE). IREDA finances renewable energy & energy efficiency projects and operates a revolving fund for promotion, development and commercialization of new and renewable sources of energy.

The sectors financed by IREDA include – clean technologies and efficiency management.

Rating of the Issue - Credit rating agencies CARE and Brickwork Ratings (BWR) have assigned ‘AAA’ rating to the issue, which is the highest rating by any of these rating agencies, indicating lowest credit risk and thus highest safety for the investors’ investments.

Interest Rates on Offer – At 8.80%, IREDA’s 15-year option interest rate stands higher than 8.75% the National Highways Authority of India (NHAI) issue was offering and the 8.65% the Indian Railway Finance Corporation (IRFC) issue carried for 15 years.

Note, the equivalent effective taxable yield is 12.75% for an investor in the 30% tax bracket, 11% in the 20% tax bracket and 9.8% for low income investors in the 10% tax bracket. This issue is therefore most attractive for investors in the highest tax bracket.

NRI Investment - Non-Resident Indians (NRIs) and Qualified Foreign Investors (QFIs) are not eligible to invest in this issue.

Listing, Lock-in Period, Premature Redemption - The bonds are listed on the Bombay

Stock Exchange (BSE) as well as on the National Stock Exchange (NSE). There is no lock-in period with these bonds, but at the same time, you cannot redeem these bonds back to the company before their maturity period gets over. In order to encash your investment before maturity, you’ll have to sell these bonds on the stock exchange(s) where they are actively traded.

Demat/Physical Option - It is mandatory to have a demat account to sell/trade these bonds, and Interest gets credited to your linked bank account through ECS.

As far as the safety of the investors’ investments is concerned, the MNRE (GoI) has issued a “Letter of Comfort” to IREDA which states, inter alia, that the Ministry has been infusing equity capital into the company to support its business plans and will continue to support it in future as and when required. Besides, the Ministry will ensure that IREDA meets its payment obligations on these tax free bonds in a timely manner. assigns this investment a risk rating of 1 - EXTREMELY LOW RISK.

With the large carbon reducing effects of this investment it deserves an E-Score of 10/10.

Being a Government of India initiative, facilitating clean technology in to social infrastructure, the Social Impact is maximum deserving a score of 10/10.

Please write to us to understand and debate the scoring systems of our featured investments. We are always happy to receive feedback on our stated opinion.

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