NHAI floats Rs 3,700-cr bond issue

May 31, 2008

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NEW DELHI: National Highways Authority of India (NHAI) has floated a fresh tranche of capital gains bonds to raise Rs 3,700 crore for funding new projects over the medium term. This is the second time in less than one year that NHAI has issued bonds. In September 2007, the organisation raised Rs 2,000 crore through such bonds.

The bonds issued by NHAI will yield an interest of 5.75% per annum and mature in three years. The face value of each bond is Rs 10,000. The Authority will accept a maximum application size of 500 bonds from a single entity or person. The bonds have been issued under Section 54 EC of the Income-Tax Act and the issue will close at the end of the current fiscal (March 31, 2009).

The issue is being marketed by banks such as Union Bank of India (UBI), IDBI Bank, selected branches of Syndicate Bank, HDFC Bank, Canara Bank and Punjab National Bank (PNB).

The government has authorised the NHAI to issue capital gains bonds with a ceiling of Rs 3,700 crore during 2008-09. Section 54EC of the Income Tax Act 1961, provides that capital gains arising from transfer of a long-term capital asset shall not be taxed so far as such gains are invested in a long-term asset within a period of six months after the date of transfer.

The NHAI is about to launch two more projects under the National Highway Development Programme (NHDP) VI and VII, which are currently in the planning stage. Both the projects have a planned investment of Rs 16,680 crores each.

NHDP VI involves the construction of a 1,000 km expressway in the western region. The cabinet committee on economic affairs has already approved the development plan of NHDP VII and the ministry of road transport and highways is in the process of setting targets for the stage by stage completion of the same.

NHAI is engaged in building the golden quadrilateral, which is part of NHDP-I and II projects. NHAI funds highway projects through issue of bonds, funds raised through fuel cess and loans from multilateral funding agencies such as Asian Development Bank and World Bank.
Source: www.economictimes.indiatimes.com