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com September 29, 2010

IDFC Infrastructure Bond

Fact Sheet

Issue details compounded) as well as opt for a buy-back option after the
Issuer : IDFC expiry of the lock-in period. Although the coupon rate on
Face value (Rs) : 5,000 offer (8% without the buy-back option and 7.5% with) is
Issue price (Rs) : 5,000 largely in line with the ten-year government bond yield, the
Issue opens on : September 30, 2010 infrastructure bonds offer certain tax benefits under Section
Issue closes on : October 18, 2010
80C, leading to a higher effective yield. The issue opens on
Minimum application : Two bonds and in multiples of
September 30, 2010 and closes on October 18, 2010.
one bond thereafter. About IDFC
Rating : LAAA from ICRA
IDFC is India's leading integrated infrastructure finance
Listing : NSE and BSE
player providing a host of financing and project
Mode of payment : 1) Electronic clearing services
implementation services. IDFC was set up in 1997 as a
2) At par cheques
focused infrastructure financier and advisor, and has worked
3) Demand drafts
in tandem with the government in matters of policy
Lead Managers : Citi, Enam, Kotak and
formulation. IDFC’s businesses can be classified into four
IDFC Capital
broad platforms:
Redemption/Maturity date : 10 years
Lock-in period : 5 years  Corporate finance and investment banking, which
Buyback date : 5 years includes the project finance, principal investments,
Coupon rate : 8% (series 1 and 2) and treasury operations, investment banking and institutional
7.5% (series 3 and 4) brokerage businesses
Tax benefits : Tax exemption for up to
Rs20,000 invested under section  Public markets asset management, which comprises the
80CCF (over and above the mutual funds business
Rs100,000 tax benefit under
section 80C, 80CC and 80CCD)  Alternative asset management, which includes the private
asset management and project management businesses
Infrastructure Development Finance Corporation (IDFC) is
 Advocacy and nation building, which includes the
looking to raise Rs3,400 crore through the issue of ten-year
government transaction advisory business
infrastructure bonds. The bonds have a lock-in period of
five years and come in four different series which allow Although IDFC has diversified the areas of its businesses
investors to choose the mode of payment of interest (annual, considerably, the lending business remains its key focus.

Details of the series under offer

Series 1 2 3 4
Frequency of interest payment Annual Cumulative Annual Cumulative
Buy-back facility N.A. N.A. Yes Yes
Buy-back date N.A. N.A. Five years from the date Five years from the date
of allotment of allotment
Buy-back amount N.A. N.A. Rs5,000 Rs7,180
Maturity date 10 years 10 years 10 years 10 years
Yield 8% 8% compounded 7.5% 7.5% compounded
annually annually
Maturity amount Rs 5,000 Rs 10,800 Rs 5,000 Rs 10,310

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Effective yields considering tax benefits Key risks

Although the coupon rate on offer (8% without the buy-  Price risk: The company’s bonds, are subject to price
back option and 7.5% with) is largely in line with the ten- risk. The price of such securities will vary inversely with
year government bond yield, the infrastructure bonds offer changes in prevailing interest rates, ie when interest
certain tax benefits under Section 80CCF leading to a higher rates rise, prices of fixed income securities fall and
effective yield (ranging from 9.18% to 17.19% depending when interest rates drop, the prices increase.
upon the tax bracket and the chosen series option for
investment of upto Rs20,000; please refer to the table below).  Rating risk: Any revision or downgrading in the credit
Apart from the competitive effective yield it is a quality rating assigned by ICRA may lower the value of the bonds
issue that has been accorded the highest rating by ICRA. and may also affect the company’s ability to raise further
debt.

Effective yields (%)

Tax rates (%) Series 1 (%) Series 2 (%) Series 3** (%) Series 4**(%)
30.9 13.89 12.06 17.19 15.74
20.6 11.57 10.52 13.41 12.57
10.3 9.64 9.18 10.23 9.86
**Assuming buyback of the bonds on the buy-back date.

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Sharekhan 2 September 2010