MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 6^th November, 2012

During The Financial Year 2012-13 - Tax-Free, Secured, Redeemable, Non-Convertible Bonds

Notification No. 46/2012

Dated 6-11-2012

S.O. 2685(E).- In exercise of the powers conferred by item (h) of sub-clause (iv) of clause (15) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby authorises the entities mentioned in column (2) of the following Table to issue, during the financial year 2012-13. Tax-free, secured, redeemable, non-convertible bonds, aggregating to amounts mentioned in column (3) of the said table, subject to the conditions specified hereunder:-

(a) Eligibility.- The following shall be eligible to subscribe to the bonds:-

(i) Retail Individual Investors (RII);

(ii) Qualified Institutional Buyers (QIBs);

(iii) Corporates;

(iv) High Net Worth Individuals (HNIs);

(b) Tenure of bonds.-

(i) In the case of India Infrastructure Finance Company Limited (IIFCL), the tenure of the bonds shall be for ten, fifteen or twenty years;

(ii) in other cases, the tenure of the bonds shall be for ten or fifteen years ;

(c) Permanent Account Number.- It shall be mandatory for the subscribers to furnish their Permanent Account Number to the issuer;

(d) Rate of interest.-

(i) There shall be a ceiling on the coupon rates based on the reference Government security (G-sec) rate;

(ii) The reference G-sec rate would be the average of the base yield of G-sec for equivalent maturity reported by Fixed Income Money Market and Derivative Association of India (FIMMDA) on a daily basis (working day) prevailing for two weeks ending on Friday immediately preceding the filing of the final prospectus with the Exchange or Registrar of Companies (ROC) in case of public issue and the issue opening date in case of private placement;

(iii) The ceiling coupon rate for AA rated issuers shall be the reference G-sec. rate less 50 basis points in case of Retail Individual Investors (RII); and reference G-sec rate less 100 basis points in case of other investor segments, like Qualified Institutional Buyers (QIBs), Corporate and High Net Worth Individuals (HNIs);

(iv) In case the rating of the issuer entity is above AA, a reduction of 15 basis points shall be made in the ceiling rate, as compared to the ceiling rate for AA rated entities [as given in clause (iii)];

(v) These ceiling rates shall apply for annual payment of interest and in case the schedule of interest payments is altered to semi-annual, the interest rates shall be reduced by 15 basis points;

(vi) The higher rate of interest, applicable to retail investors, shall not be available in case the bonds are transferred, except in case of transfer to legal heir in the event of death of the original investor;

(e) Issue expense and brokerage.-

(i) In the case of private placement, the total issue expense shall not exceed 0.2% of the issue size and in case of public issue it shall not exceed 0.5% of the issue size;

(ii) The issue expense would include all expenses relating to the issue like brokerage, advertisement, printing, registration etc.;

(iii) The brokerage, in cases of different categories, shall be limited to the following ceilings:-

(I) QIB - 0.05%

(II) Corporates-0.1%

(III) HNI - 0.15%

(IV) RII - 0.75%;

(f) Public issue.-

(i) At least 75% of the aggregate amount of bonds issued by each entity shall be raised through public issue;

(ii) 40% of such public issue shall be earmarked for retail investors;

(g) Private placement-

(i) While adopting the private placement route to issue the bonds, each entity shall adopt the book building approach as per the Regulations 11 of the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008, wherein bids shall be sought on the coupon rate subject to a ceiling specified by the entity and the allotment shall be made at the price bid;

(ii) The bonds shall be paid for and issued at a premium but with a fixed coupon so that the instrument can be traded under a single International Securities Identification Number (ISIN) and the yield shall be worked based on the price quoted and then allotment shall be done for best price (lowest yield);

(iii) The ceiling rate of the interest shall either be equal to or lower than the rate mentioned in paragraph (d);

(iv) While calling for bids, there shall be no limit on the number of arrangers who can bid for the issue;

³[*** ]

(h) Repayment of bonds.-

(i) The issuer entity shall submit a financing plan to the Ministry of Finance to demonstrate its ability to repay the borrowed funds once the repayment becomes due;

(ii) This financing plan shall be submitted to the Infra-Finance Section, Infrastructure and Investment Division, Department of Economic Affairs, Ministry of Finance, within three months of closure of the issue, duly supported by a resolution of the respective entity's Board of Directors;

(i) Selection of merchant bankers.- Merchant bankers shall be selected through competitive bidding process wherein the only technical criteria for pre-qualification shall be the total funds mobilised through public issue of debt and equity together over the past five years and after pre-qualification, the final selection shall be based on financial bids;

(j) The benefit under the aforesaid section 10 shall be admissible only if the holder of such bonds registers his, her or its name and the holding with the entity.

Table

S. No. (1)	Entities (2)	Aggregate amount of bonds (3)
1.	National Highways Authority of India	Rs. 10,000 crores
2.	Indian Railway Finance Corporation Limited	Rs. 10,000 crores
3.	India infrastructure Finance Company Limited	Rs. 10,000 crores
4.	Housing and Urban Development Corporation Limited	Rs. 5,000 crores
5.	National Housing Bank	Rs. 5,000 crores
6.	Power Finance Corporation	Rs. 5,000 crores
7.	¹[Rural Electrification Corporation Limited]	Rs. 5,000 crores
8.	Jawaharlal Nehru Port Trust	Rs. 2,000 crores
9.	Dredging Corporation of India Limited	Rs. 500 crores
10.	Ennore Port Limited	Rs. 1,000 crores
²[11.	The Indian Renewable Energy Development Agency Limited	Rs. 1000 crores.]

Explanation.- For the purposes of this notification,-

(i) Qualified Institutional Buyers shall have the same meaning as assigned to them in the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000.

(ii) Retail Individual Investors means those individual investors, Hindu Undivided Family (through Karta), and Non Resident Indians (NRIs), on repatriation as well as non-repatriation basis, applying for upto Rs. ten lakhs in each issue; and individual investors investing more than Rs. ten lakhs shall be classified as High Net Worth Individuals.

(iii) The bonds issued to NRIs shall be subject to the provisions of Notification No. FEMA 4/2000-RB dated 3rd May, 2000 and Notification No. FEMA 20/2000-RB dated 3rd May, 2000, issued under clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999, as amended from time to time.

(iv) The credit rating referred to in paragraph (d) of this notification shall mean the credit rating, as assigned by a credit rating agency which is approved by the Securities and Exchange Board of India as well as the Reserve Bank of India and where an entity has been rated differently, by more than one rating agency, the lower of the two ratings shall be considered.

[F. No. 178/60/2012-(ITA.1)]

SURABHI SHARMA, Under Secy. (ITA.I)

Notes:-

1. Corrected vide Corrigendum Notification No. 50/2012, dated 15-11-2012, before it was read as:- "Rural Electrical Corporation"

2. Inserted vide NOTIFICATION NO. 10/2013 , DATED 5-2-2013 .

3. Omitted vide Notification No. 23/2013 dated 22/03/2013 before it was read as “(v) The issue size shall be limited to rupees five hundred crores for each tranche;