Investment Strategies: IDFC Infrastructure Bonds — A Simple Way To Decide Whether To Invest Or Not

by Vinaya HS on October 12, 2010

in Finance

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Here’s what I suggest. Ignore all those complicated analysis (an example) of yields and returns and comparisons with other fixed-return financial products. Buy these bonds if and only if:

  • Your objective is to lower your income tax, and

  • You fall in one of the highlighted cells below.

IDFC_Bond_Analysis

In such a case, opt for the Series – 4 option. Else, don’t bother. Put your money to better use — get started on that emergency fund or make an extra payment against your loan’s principal.

Contrarian to what everyone else’s saying?

Note: Published this post ahead of its schedule given the issue closing date.




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{ 21 comments… read them below or add one }

Yogeeta October 12, 2010 at 10:15 AM

Timely advice. Thanks Vinaya.
A note: I read that the min investment is Rs. 10,000/-.

Vinaya HS October 12, 2010 at 10:22 AM

@Yogeeta:

Good to hear from you again. :-) And thanks for that note. The minimum investment amount is indeed Rs 10,000. Makes Row #1 of the table irrelevant.

Vinaya HS October 12, 2010 at 10:22 AM

@All:

Per the comments above, please ignore Row #1 of the table.

Anoop Gupta October 12, 2010 at 10:55 AM

Hi
I also want to invest in IDFC Infrastructure bonds but I wont have any Demat account. Kindly guide me and suggest me the way of investing in Infra bonds

Vinaya HS October 12, 2010 at 11:01 AM

@Anoop:

A Demat account is mandatory for investing in the IDFC Infrastructure Bonds since these bonds will ultimately be listed on the stock exchanges. So, without that Demat account you won’t be able to invest in these bonds.

I read that the issue closing date has been pushed to October 22, 2010. Do you think you’ll be able to open a Demat account in this time?

Nikhil Shah October 12, 2010 at 11:41 AM

Hi..

Now a Demat Account is NOT MANDATORY for investing in the IDFC Infrastructure Bonds..If Want to invest this bonds then you should submit following documents :-

(1 ). Photo Copy Of PAN Card
(2). Photo copy Of Address Proof
(3). One ” CANCEL” Cheque For ECS Payment..

Issue Closing dtae has been pushed to 22/10/2010…

Keep it up..

Nikhil Shah

Anoop Gupta October 12, 2010 at 11:47 AM

@ Nikhil
Thanks for posting this information as it will be very much helpful for a person like me who wants to invest in Infra bonds without demat account.
Keep investing fast now

Vinaya HS October 12, 2010 at 11:47 AM

@Nikhil:

Thanks for sharing the update. But do you know where it’s mentioned that a Demat account is not required. I checked @ http://www.idfc.com/infrastructure_bonds.htm and it still says that a Demat account is required. Couldn’t find any update on Google News as well.

Nikhil Shah October 12, 2010 at 12:18 PM
Ajay October 12, 2010 at 10:30 PM

Even I got an email from a investment company that DEMAT a/c is not required.

Vinay October 13, 2010 at 6:32 PM

Vinaya and all-
Correct me if I am wrong!
I feel their is a lock-in period of 10 years for these infrastructure bonds?

Vinaya H S October 14, 2010 at 5:52 AM

@Vinay:

No. The bonds will be listed on NSE and BSE and can be traded after the 5 year lock-in period. The Series 3 and Series 4 options also come with a buyback clause.

Anil Kuppa October 14, 2010 at 7:52 PM

Hi Vinaya,
You say that series 4 is better. But, the returns on series 4 are less than that on series 2.
Could you explain?
Another thing is you can invest through fundsindia.com too. I’m one of the investors for fundsindia.com . It’s one of the best ways to invest in mutual funds/bonds/fixed deposits through online as it does not charge any brokerage rate.

I think you can invest through Bajaj Capital too.

Anil

Vinaya H S October 15, 2010 at 10:23 AM

@Anil:

I recommend Series 4 primarily because it has a buyback option. Though the bonds will be listed on the NSE and BSE, given the status of the retail bond market today, I’m not sure if these bonds can be readily sold upon listing. The buyback clause gives you an additional degree of financial flexibility.

Anonymous October 19, 2010 at 3:04 PM

Can i invest in the bond after 22nd Oct 2010.

Vinaya HS October 19, 2010 at 3:06 PM

@Anonymous:

No. You’ll need to wait for five years for the bonds to get listed on the stock exchanges. Then you can buy them.

Anonymous October 19, 2010 at 3:12 PM

If i buy the bonds in physical form, than how can i sell those after 5 yrs on stock exchange.

Vinaya HS October 19, 2010 at 3:24 PM

@Anonymous:

Simple. Open a Demat account. Submit the physical certificates for conversion to electronic format. You can do this at any time — no need to wait for the bonds to get listed.

BP CHOUDHARI October 25, 2010 at 2:27 PM

Opening of D-Mat account
Investment in Infrastructure Bonds
Returns from Infrastructure Bonds
Exit from Infrastructure Bonds
Benefits of Infrastructure bonds
Pl elaborate

Sudha January 19, 2011 at 1:06 PM

Good advice. The calculations were making my head reel! Also seems more beneficial to the 30% tax category.
Found this discussion about the bonds at
http://www.jagoinvestor.com/2010/10/should-you-invest-in-idfc-infrastructure-bonds.html

Amit Surpuriya January 24, 2012 at 11:54 PM

FOR APPLICATION OF INFRASTRUCTURE BOND – CONTACT – AMIT SURPURIYA – 9850873688 – PUNE

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