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• The National Highways Authority of India (NHAI) hopes to mop up as much as `10,000 crore through an issue of tax-free secured redeemable non-convertible bonds, launched Monday.The proceeds will be used to fund its proposed mega expressways and to support its ambitious target of laying 20 km of road a day.The highway network in the country is at barely 1.7% of the total road network.The highway bonds are being issued in two series — Tranche 1 Series 1 and Tranche 1 Series 2 — which have tenures of 10 years and 15 years, respectively.The total issue size under Tranche 1 aggregates to Rs5,000 crore with an option to retain over-subscription up to Rs10,000 crore.
• The bonds have a face value of Rs1,000 each. The coupon rate is 8.2% for the 10-year bond and 8.3% for the 15-year paper. The issue will be listed on both BSE and NSE, and can be traded.Capital gain before the end of one year from allotment would be treated as short-term capital gain and would be taxed accordingly, while capital gain after one year would be taxed 10% (after indexation).According to Dr J N Singh, member, finance, NHAI, land acquisition for its five proposed mega expressway projects is estimated to top Rs8,000 crore and will soak up most of the money raised through the bonds.
• The rest would be used to convert 20,000 km of single-lane roads into double-laned roads.To ensure that investors in remote areas get a chance to participate, the issue will not be closed before the end of three days.There is a 30% reservation for retail investors, who can purchase bonds up to Rs5 lakh.High networth individual clients also have a 30% reservation in the issue and need to invest at least `5 lakh.The bonds can be allotted in both demat and physical forms and only those having PAN cards can apply.The interest earned on the bonds is tax-free. Going by Singh, competitive-tariff bidding and players paying a premium rather than taking viability gap funding from the government for these projects has spelled wonders for NHAI as it would save around `22,000 crore over a period. He conceded, however, that “The aggressive bidding from players is helping NHAI in mopping up funds, but it is not a good sign as developers would operate on very thin margins and if their assumptions on traffic density prove wrong, then they would be in a big soup.”
• Singh is confident NHAI would award contracts for around 7,300 km of road construction this fiscal, compared with 5,056 km in the last.“Fast allotment of contracts would have an impact in three years from now and I am confident that by FY14, India would have 20 km of new roads every day,” he said.India has a Highway portfolio of 71,000 km out of which 47,000 km is being awarded to various developers for redevelopment. Work on 16,340 km has been completed and 14,000 km is under various stages of implementation.“The rest will be taken for redevelopment work very soon and here we will use the money raised from our bond issue,” said Singh.

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