The state electricity boards power bond series 1/98 opened for subscription on July 23. This is the boards first non-SLR bond issue, and the issue proceeds will go towards the development of its transmission and distribution network. With a 7-year tenure and a LAA- (SO) rating from ICRA, the bonds offers two schemes. Scheme A offers taxable bonds at 14.5 per cent interest, while Scheme B has tax-free bonds at 12.5 per cent u/s 10 (23G) of IT Act for infrastructure-capital company or funds. The Rs 100 crore collected so far has been only through Scheme A.

According to Apple Finance, advisors and sole arrangers to the issue, it is likely to be filled up in another weeks time, if the enquiries are any indication.

Of the Rs 100 crore mopped up, provident funds accounted for Rs 15 crore, while thebalance came from banks. According to Apple Finance vice-president (investment banking division) J Pradhan, most south-based banks have already invested, while some were in the final stages of doing so.

Pradhan said though upcountry collection figures were not available, they were expected to be good. Presentations had also been made to institutions such as LIC, GIC and UTI and a decision was expected after an inter-institutional meeting later this month.

With the narrowing of the definition of an "infrastructure capital company" in the recent budget, only the Infrastructure Development Finance Company (IDFC) along with a few funds qualify for making investment in scheme B. IDFC, however, seems to have indicated its unwillingness to subscribe to the issue as it does not want to be commit funds for seven years. And moreover, investing in the issue was against its role of supplementing capital to private infrastructure projects.

The bond issue is guaranteed by the Tamil Nadu government and also has anescrow mechanism which ensures timely payment of interest and repayment of principle. The bonds will be redeemed at the end of the fifth (35 per cent), sixth (35 per cent) and seventh (30 per cent) year.