NHAI cuts coupon rate by 0.5 pc

Our Bureau

NEW DELHI, Nov. 29

THE National Highways Authority of India (NHAI) has effected a 0.5 per cent cut in the coupon rate from 9 per cent to 8.5 per cent on its bonds issued under Section 54 EC of the Income-Tax Act.

The highway bonds, which were issued on tap basis and opened to subscription on July 20, has so far collected Rs 340 crore, taking the total amount mobilised under this instrument to Rs 1,006 crore till date, the Government sources said. The mop-up through the bond issue last year was Rs 656 crore.

The bonds issued under Section 54 EC are exempted from long-term capital gains and would be utilised by the NHAI for part-funding the13,000 km-long National Highways Development Project (NHDP).

In view of the 0.5 per cent cut in the interest rates, subscriptions will be suspended for a week from December 1 to 7. The bond issue will resume on December 8 and would be available on tap for the remaining part of the fiscal at the revised interest rates.

According to sources, the cut was effected to align the coupon rates for NHAI bonds with the market rates for similar instruments. For a 5-year paper, the 9 per cent interest was considered to be higher, the sources said.

Moreover, bonds issued under Section 54 EC were being used as a treasury instrument by some of the investors such as banks and financial institutions to reap upfront benefits, the sources pointed out.

By effecting a 0.5 per cent cut, the NHAI has brought the coupon rate of its bond on par with those issued by Nabard under the same section.

The NHAI had fixed a target of Rs 3,600 crore to be raised from the market through bond issues by March 31, 2002. Apart from the Rs 1,006 crore collected so far through bond issues, the NHAI has also taken into account Rs 2,000 crore worth of highway projects awarded to private investors on the annuity basis.

Annuity is nothing but deferred payment and would qualify for inclusion under the market borrowings component, the sources said.