Bonds, Currencies & Commodities
JNPT seeks SEBI nod to raise up to Rs 2,000 crore via tax-free bonds

The proceeds are proposed to be utilised for the dredging works for deepening and widening of the Mumbai harbour channel and JN Port’s navigational channel and capital expenditure for other port projects

Jawaharlal Nehru Port Trust (JNPT), India’s largest container port, has approached the Securities and Exchange Board of India’s (SEBI) for approval to raise up to Rs2,000 crore through tax-free bonds.

 

In its draft prospectus with the market regulator, JNPT said it would raise “up to Rs500 crore with an option to retain over-subscription up to Rs1,500 crore such that the overall issue size does not exceed Rs2,000 crore”.

 

“The net issue proceeds raised through this issue are proposed to be utilised primarily for the purpose of dredging works for deepening and widening of the Mumbai harbour channel and JN Port’s navigational channel and capital expenditure for other projects in relation to the port operations,” JNPT said.

 

Kotak Mahindra Capital, ICICI Securities, SBI Capital Markets are the lead managers, while Bigshare Services is the registrar to the issue.

 

The shipping ministry controlled entity handles nearly 60% of the country's total container traffic.

 

In January, the finance ministry has given its nod to JNPT along with Dredging Corporation of India (DCI) and Ennore Port, to collectively raise Rs3,500 crore from tax-free bonds.

 

Earlier this month, Ennore Port had approached SEBS for approval to raise up to Rs1,000 crore by issuance of tax-free bonds to support its financing activities.

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Inflation Index Bonds: Issues and challenges

For small investors, Inflation index bonds can be beneficial. Though the real return from these bonds will be close to being a very nominal amount, the wealth erosion won’t happen

This comes in the background of increasing gold import in the country which has added to the increasing current account deficit. To wean investors away from buying gold, Reserve Bank of India (RBI) has decided to introduce inflation-indexed bonds (IIBs) in a new avatar  Whether gold import will be reduced as a result of this measure is debatable, the basic idea of these bonds is to give subscriber of these bonds protection from inflation.  It is pertinent to note that these bonds were introduced earlier in India as well but somehow could not work in terms of attracting attention of investors. In 1997, RBI has introduced capital index bonds which got matured in 2002.
 

Fixed Income: Risks with NBFCs
 

Inflation Indexed Bond: How it works internationally
 

What is inflation indexed bond and how it works? Many countries in the world have issued it and the idea of inflation indexed bond has worked successfully in these countries. For instance, in USA, this type of bond is called as,’ Treasury Inflation Protection Security’ or TIPS. Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of TIPS increases with inflation and it decreases with deflation, as measured by the Consumer Price Index. When TIPS matures, an investor is paid the adjusted principal or original principal, whichever is greater. In UK, such bonds are called as,’Index Linked Gilts’. Index-linked gilts differ from conventional gilts in that both the semi-annual coupon payments and the principal payment are adjusted in line with movements in the General Index of Retail Prices in the UK (also known as the RPI). Australia has issued inflation index bonds more on the pattern of USA. As per Australian Office of Financial Management,’ Treasury Indexed Bonds will be issued only as capital-indexed bonds with the capital value of the investment being adjusted by the rate of inflation. Interest will be paid quarterly, at a fixed rate, on the adjusted capital value. At maturity, investors will receive the inflation-adjusted capital value of the security - the value as adjusted for inflation over the life of the bond.
 

Buying bonds from secondary market: Go through the checklist
 

Challenges before RBI
 

Issuance of inflation indexed bonds in India is full of challenges for RBI. The first and the most important challenge come from the fact that we have two indices which are used for calculation of inflation. One is Wholesale Price Index (WPI) and the second is Consumer Price Index (CPI). Which one should RBI use for benchmarking inflation indexed bonds? This is a dilemma which many governments internationally have faced. The next challenge would be identifying whether only principal should be adjusted to inflation or even coupon should be adjusted. There are both models available in the world. Adjusting both principal and coupon is a very attractive proposition for investors but very costly concept for a high inflation country like India. Additionally another aspect that needs to be considered is the taxability of these bonds. Any taxation of these bonds will reduce real returns of investors and hence these bonds should be logically tax free.
 

Benefits for Investors
 

For investors it can open a new avenue of investments. There are very few risk free investment options in India which have the potential to match inflation. As a result of this, investors have to venture into the world of uncertainties. For the small investors, this type of bond can be beneficial. Though the real return from these bonds will be close to being a very nominal amount, the wealth erosion won’t happen.

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COMMENTS

hasmukh

5 years ago

Good opportunity for people. If they put money in such bonds, their capital is protected in real terms (i.e. against too high & killing inflation) besides giving some return.

Rise in onion prices temporary phenomenon: Pawar

Wholesale prices of onion at Lasalgaon in Nashik, Asia's largest onion market, have increased by more than five-fold to Rs20.50 per kg today from Rs3.55 per kg in the year-ago period

 

New Delhi: Amid soaring onion prices bringing tears to consumers, agriculture minister Sharad Pawar on Wednesday termed the rise in its rates as a “temporary phenomenon” and said supply would improve in the coming days, reports PTI.

 

Wholesale prices of onion at Lasalgaon in Nashik, Asia’s largest onion market, have increased by more than five-fold to Rs20.50 per kg today from Rs3.55 per kg in the year-ago period, according to government data. A similar increase is seen in the retail prices across the country.

 

“Prices have hardened as onion area in Maharashtra, the major growing state, has been affected due to drought. Rise in prices is a temporary phenomenon,” Pawar told PTI.

 

Stating that onion is grown in areas dependent on rains, the minister said that onion area in drought-hit states like Maharashtra has been affected but overall production would be sufficient to meet the domestic demand.

 

“I had visited the key onion areas yesterday, the crop from other parts of the states is good and availability will improve in the coming weeks,” he said.

 

According to Nasik-based National Horticultural Research and Development Foundation (NHRDF), area under onion crop is down by 10% from 10.87 lakh hectare this year.

 

NHRDF director RP Gupta said: “Prices of onion are rising in anticipation of a drop in output. But we expect overall production to be same at last year's level of 174 lakh tonnes. Productivity is expected to be higher and there will not be shortage of supply.”

 

As per the official data, retail prices of onion have increased to Rs28 per kg now from Rs13 a kg in the year-ago period in most parts of the country.

 

Maharashtra, Karnataka and Gujarat are the top three onion growing states in the country which suffered drought.

 

Last year, onion production in India stood at 174 lakh tonnes.

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