L&T Infrastructure Finance Company Ltd (LTIFC) was incorporated in 2006, and is registered with RBI, as a systemically important non deposit taking Non-Banking Financial Company and classified as an Infrastructure Finance Company.
Their business comprises the provision of financial products and services for customers engaged in infrastructure development, construction, operations and maintenance with a focus on the power, roads, telecommunications, oil & gas and ports sectors in India. The operations of LTIFC are divided into the three different business segments of Project Finance, Equity Investment, and Financial Advisory Services Segment.
Credit Rating ICRA - [ICRA] AA+
CARE – CARE AA+
Strength
The strength of LTIFC lies in its ultimate parent - Larsen and Toubro Ltd (L&T) - one of India’s largest Engineering and Construction Company and its continued demonstrated support to LTIFC by way of capital infusion as well as provision of business opportunities. The brand equity of L&T also benefits LTIFC and guidance available from professionals serving on the Board of Directors and accumulated experience of its key management personnel. LTIFC in the current financial year has been granted the status of a Public Financial Institution (PFI), which amongst other benefits allows it access to the SARFAESI Act, which would support its ability to manage recoveries.
Weakness
LTIFC’s ability to scale up operations, maintain high capital adequacy in view of capital intensive nature of infrastructure lending business, manage risks associated with infrastructure sector financing, in addition to maintaining its asset quality and profitability shall be the key rating sensitivity’s.
LTIF’s relatively high proportion of exposures to the power sector, where the sector is currently facing fuel supply availability (in case of Thermal power projects) and counter party risk concerns. While LTIF’s power sector exposures (38% of total portfolio as on September 30, 2011) are diversified across the thermal, hydro and solar segment and that the company has some of its exposures to captive power plants mitigate some of aforementioned risks to an extent.
Financial Performance
Utilization of the proceeds
The proceeds of the Issue shall be utilized towards ‘infrastructure lending’ as defined by the RBI in the regulations issued by it from time to time. The end-use shall be duly reported in the annual reports and other reports submitted by the Company to the regulatory authority concerned, and specifically certified by the Statutory Auditor of the Company. Minimum Subscription
In terms of the Debt Regulations, an issuer undertaking a public issue of debt securities may disclose the minimum amount of subscription that it proposes to raise through the issue in the offer document. In the event that an issuer does not receive the minimum subscription disclosed in the offer, the application monies received in the public issue are to be refunded. The Company has decided to set no minimum subscription for the Issue.
Issue Program
Issue Opening Date- January 10, 2012
Issue Closing Date – February 11, 2012
Deemed Date of Allotment - Deemed Date of Allotment shall be the date as may be determined by the Board / Committee of the Company and notified to BSE in relation to the allotment of the Tranche 2 Bonds.. The actual allotment may occur on the date other than the Deemed Date of Allotment.
Terms of Issue
Issuer: L&T Infrastructure Finance Company Limited
Issue: Public issue of long term infrastructure bonds of face value of Rs.1,000 each, in the nature of secured, redeemable, non-convertible debentures, having benefits under section 80CCF of the Income Tax act, 1961 (the “Tranche 2 Bonds”),for an amount aggregating up to Rs. 300 Crs with an option to retain an oversubscription up to the Shelf Limit (including the amount received against the allotment of the Tranche 1 Bonds), to be issued at par on the terms contained in the Shelf Prospectus and this Prospectus - Tranche 2.
Listing: Tranche 2 proposed for listing on BSE
Face Value: Rs.1,000
Issue Price: Rs.1,000
Issuance: In dematerialised form*
Trading: In demat form post the Lock-in period
Lock In period: 5 years from the Deemed Date of Allotment
Redemption/Maturity Date: 10 years from the Deemed Date of Allotment
Security: Exclusive first charge on specific receivables of the Company with an asset cover of 1 time of the total outstanding amount of Tranche 2 Bonds, as may be agreed between the Company and the Trustees for the Debenture holders and first pari-passu mortgage/charge on the
leasehold rights on 300 sq.ft. undivided share of vacant land situated at Commander-in-Chief Road, Egmore, Chennai in the State of Tamil Nadu
Security Cover: 1 time
Debenture Trustee: Bank of Maharashtra
Depositories: NSDL and CDSL
Minimum Application: 5 Tranche 2 Bonds and in multiples of 1 Tranche 2 Bond thereafter. For
the purpose of fulfilling the requirement of minimum application of 5 Tranche 2 Bonds, an Applicant may choose to apply for the Bonds across the same series or different series.
Buyback Options: Buyback options are available to the Investors on the first Working Day after the expiry of 5 years from the Deemed Date of Allotment or on the first Working Day after the expiry of 7 years from the Deemed Date of Allotment, as the case may be.
* In terms of Regulation 4(2)(b) of the Debt Regulations, the Company will make public issue of the Tranche 2 Bonds in the dematerialised form. However, in terms of Section 8 (1) of the Depositories Act, the Company, at the request of the Investors who wish to hold the Bonds in physical form will fulfil such request.
** The Issue shall remain open for subscription during banking hours for the period indicated above, except that the Issue may close on such earlier date or extended date as may be decided by the Board/ Committee of Directors, as the case maybe, subject to necessary approvals. In the event of an early closure or extension of the Issue, the Company shall ensure that notice of the same is provided to the prospective investors through newspaper advertisements on or before such earlier or extended date of Issue closure.
Terms of Issue
Company Profile
* The yield on the Tranche 2 Bonds (to be paid by the Issuer) shall not exceed the yield on government securities of corresponding residual maturity, as reported by FIMMDA, as on the last working day of the month immediately preceding the month of the issue of the Tranche 2 Bonds i.e. as on December 30, 2011.
Type of Eligible Investors
1. Indian national resident in India, who are not minors
2. Hindu Undivided Families or HUFs, in the individual name of the Karta
Type of Ineligible Investors
1. Non Resident Indians
2. Foreign Institutional Investors
3. Overseas Corporate Bodies
Taxation
Tax Deduction at source
As per clause (ix) of Section 193 of the Income Tax Act, no income tax is required to be withheld on any interest payable on any security issued by a company, where such security is in dematerialised form and is listed on a recognised stock exchange in India in accordance with the SCRA, and the rules notified thereunder. Accordingly, no income tax will be deducted at source from the interest on Tranche 2 Bonds held in dematerialised form. In case of Tranche 2 Bonds held in a physical form no tax may be withheld in case the interest does not exceed Rs.2,500 in a financial year. However, such interest is taxable income in the hands of resident Bondholders.
Tax Benefits Notification
The Tranche 2 Bonds are classified as “long term infrastructure bonds” and are being issued in terms of Section 80CCF of the Income Tax Act, 1961 and the Notification. In accordance with Section 80CCF of the Income Tax Act, 1961 the amount, not exceeding Rs. 20,000, paid or deposited as subscription to long-term infrastructure bonds during the previous year relevant to the assessment year beginning April 01, 2012 shall be deducted in computing the taxable income of a resident individual or HUF.
However the bondholders are advised to also consult their own tax advisor on the tax implications of the ownership and sale of bonds, and income thereof.
Thanks,
Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd
