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The investment limit for retail investors in the tax-free bond of Rural Electrification Corporation Ltd (REC), which opened yesterday, has been raised to Rs 5 lakh from Rs 1 lakh allowed earlier.
This follows the tweaking of the definition of retail investors by the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) on March 6, the day the bonds opened for subscription.
The GoI notification said that any individual investor investing up to Rs 5 lakh shall be treated as retail investor and any individual investor investing more than Rs 5 lakh shall be treated as High Networth Individual.
The raising of the limit would probably help the chances of investors being allotted more bonds in proportion to their investment in case of very heavy subscription. The company had proposed to raise Rs 1,500 crore through the public issue of tax-free secured redeemable non-convertible bonds of face value of Rs 1,000 each, in the nature of debentures, during FY 2011-12.
It had the option to retain oversubscription of up to an aggregate Rs 3,000 crore. The REC tax-free bond Issue will close on March 12 and the minimum application amount is Rs 5,000. The retail coupon rate is 8.13 per cent for 10-year bond and 8.32 per cent for 15-year bond. The bonds are proposed to be listed on the BSE and there is no lock-in period.
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