REC Limited Raises Rs 5,000 Crore with Zero Coupon Bonds
New Delhi [India], October 1: REC Limited, a ‘Maharatna’ company under the Ministry of Power, has successfully raised Rs 5,000 crore through Zero Coupon Bonds (ZCB) at an effective yield of 6.25% per annum.
The bonds received a tremendous response, being oversubscribed seven times over the issue size. Rated AAA by four credit rating agencies, these bonds are issued at a deep discount and redeemed at face value. Investors benefit from lower taxation as the redemption is treated as long-term capital gain, taxed at 12.5% per annum.
This is the first issuance of CBDT notified zero coupon bonds by REC since fiscal 2010-11. The bonds will be listed on BSE and NSE.
REC, granted Maharatna status in 2022, finances a wide range of power infrastructure projects, including generation, transmission, distribution, renewable energy, and new technologies like electric vehicles and green hydrogen. Established in 1969, REC has also diversified into non-power infrastructure sectors such as roads, metro rail, airports, and educational institutions.
Doubts Revealed
REC Limited -: REC Limited is a company in India that helps fund projects related to electricity and other infrastructure. It is very important and is recognized by the government.
Maharatna -: Maharatna is a special status given by the Indian government to very large and important companies. It means the company is very big and successful.
Ministry of Power -: The Ministry of Power is a part of the Indian government that looks after electricity and power supply in the country.
Zero Coupon Bonds -: Zero Coupon Bonds are a type of loan where you don’t get interest payments regularly. Instead, you buy them at a lower price and get the full amount back later.
Rs 5,000 crore -: Rs 5,000 crore is a very large amount of money. One crore is 10 million, so 5,000 crore is 50 billion rupees.
6.25% annual yield -: 6.25% annual yield means that if you invest money, you will earn 6.25% more each year.
Oversubscribed -: Oversubscribed means that more people wanted to buy the bonds than were available. It shows that many people were interested.
AAA rating -: AAA rating is the highest rating given by credit rating agencies. It means the investment is very safe and reliable.
Credit rating agencies -: Credit rating agencies are companies that check how safe it is to invest in something. They give ratings like AAA to show how good the investment is.
Tax benefits -: Tax benefits mean you can save money on taxes by investing in these bonds.
BSE and NSE -: BSE (Bombay Stock Exchange) and NSE (National Stock Exchange) are places where people buy and sell shares and bonds in India.
Renewable energy -: Renewable energy comes from sources that don’t run out, like the sun, wind, and water. It is better for the environment.
Electric vehicles -: Electric vehicles are cars and other vehicles that run on electricity instead of petrol or diesel. They are better for the environment.