VIJAYAWADA: After issuing bonds worth Rs 2,000 crore to raise money from institutional investors for the construction of Amaravati, the Capital Region Development Authority (APCRDA) is learnt to have decided to issue retail bonds for Rs 500 crore. While the face value of the bonds is yet to be finalised, officials said, it is expected to be between Rs 100 and Rs 500.
The APCRDA is understood to have initiated the process of finalising modalities for the same. “We are looking at an issue size of Rs 500 crore for retail bonds. Depending on the response, we will go for another issue. The interest rate and tenure are yet to be determined and will be decided based on market conditions when the bonds are issued,” a senior official explained.
Even though the authority initially planned to mobilise between Rs 1,000 and Rs 3,000 crore through retail bonds, it decided to go for a smaller issue size keeping debt servicing in mind. The Special Commissioner of APCRDA, V Rama Manohara Rao said issuance of retail bonds may happen towards the end of the year.“Unlike bonds for institutional investors, retail bonds will need more security compliances, so it will take three to four months,” he said.
The officials are also studying the interest rates of various savings schemes introduced by commercial banks and retail bonds issued by other agencies in the past.”Long tenures such as 10 years or above will not be lucrative for retail investors. Similarly, retail investors or public would buy the bond only if the interest rate is higher than what’s offered by banks which are presently between six to nine per cent for different categories,” the official revealed, indicating that retail bonds’ interest could be between 8 and 10 per cent. It maybe noted that the Amaravati Bonds-2018, for institutional investors, was issued at 10.32 per cent.
Official observed that the interest rate would be determined based on whether or not the Centre permits the State to issue tax-free infrastructure bonds. State officials argued that announcing tax concessions on retail bonds would encourage investors to purchase bonds as they need not pay income tax on payable interest.