Ennore Port Tax Free bonds offers 9% interest – Should you invest?
Ennore Port tax free bonds would hit the market on 18th February, 2014. Currently IREDA tax free bond issue would open next week for subscription on 17th February, 2014. Ennore Port tax free bonds have come at this time offering higher interest posing competition to other Govt enterprise. Should you invest in Ennore Port Limited tax free bonds of 2013-2014? What are the features of tax free bonds issued by Ennore Port now in Feb/Mar-2014? How does Ennore bonds of 2013-2014 compared with IREDA bonds which are opening at similar time?
About Ennore Port
Ennore Port Limited is a developer and operator of Ennore Port which is 12th largest port in India. Ennore Port works under the Ministry of finance. It is a Govt. of India enterprise.
Features of Ennore Port Tax Free bonds – February/March, 2014
- Issue start date: 18-Feb-2014
- Issue end date: 14-Mar-2014
- Face value of the bond is Rs 1,000.
- Minimum investment – 5 Bonds, i.e. Rs 5,000 and in multiple of 1 bond thereof
- Interest rates (Retail investors) and tenure are (< Rs 10 Lakh investment)
- 10 Years – 8.61%
- 15 years – 9.00%
- 20 years – 9.00%
- Non Resident-Indians are not eligible to apply for these bonds.
- Retail Investors who are applying for bonds for above Rs 10 Lakhs would get 0.25% less interest compared to the rates indicated here.
- Interest is paid per annum.
- There is no tax on tax free bonds, hence no TDS would be deducted.
- These tax free bonds would be listed on BSE, hence these are liquid investments.
- You can apply in demat form or physical form.
Why to invest?
- Ennore Port is Govt of India enterprise, hence it is safe to invest.
- Attractive tax free returns up to 9% per annum for 15 or 20 year tenure bonds. If you are in a high tax bracket of 30%, your pre-tax return works out to be 13.02%. Currently banks are offering 9% interest rates (pre-tax). Similarly, if you are in the 20 % tax bracket, your pre-tax return works out to be 11.34%. Hence, these bonds offer good interest rates for such high tax bracket individuals.
Why not to invest?
- Company credit rating is AA which is low. Investing in highly rated companies provides security. Though this is a Govt. of India enterprise, this low rating shows less ability of company for payment of capital and interest.
Ennore Port Tax Free bonds Vs IREDA Tax Free Bonds
IREDA tax free bonds would open subscription, in the next few of days. Here is the comparison statement.
- Safety: Both are Government enterprises, hence these tax free bonds are safe.
- Credit rating: IREDA is rated AAA which indicates highest safety. However Ennore tax free bonds rated as AA. Comparing to Ennore bonds, IREDA bonds are better as it carries highest rating.
- Interest rates: For 10 year bond, Ennore port offers 8.60% interest, IREDA offers 8.41% only. Hence Ennore bonds are better for 10 year period. Similarly for 15 year bond or 20 year bond, IREDA offers 8.8%, however Ennore Port offers 9%. If you are a long term investor, Ennore Port bonds are better.
How to apply Ennore Port Tax free bonds?
Since these are issued through the demat form, you can apply online through your broker where you are maintaining demat account. If you want to apply in physical form, you can go through the instructions given on the Ennore Port website. I feel it is better to apply through demat account for easy liquidity.
Conclusion: Ennore Port bonds offer 9% tax free returns per annum for 15 and 20 year bond. However, though this is Govt of India enterprise, rating of these bonds as AA indicates less safety. There are better rated tax free bonds available stock market, which provides similar interest. IREDA also offers 8.8% tax free interest, though the interest rate is slightly less by 0.2%. There are a few bonds available in the stock market now with high rating, but provides similar interest. You can check our Monday’s article (17th February, 2014) about them. Personally, I would show less interest in these Ennore Port bonds due to its low rating.
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Ennore Port Tax Free bonds