Keep an Eye on India's Innovations in Infrastructure Funds

by Pooja Late so cut

Infrastructure bonds are investment opportunities issued by a company that is authorized to sell bonds to investors. After the bonds are released into the market and investors subscribe to them, the proceeds are used to finance infrastructure projects across a country. These developments include installations, services, basic facilities and other projects that are needed for running a country or a community. The facilities could include transportation and communication systems, public buildings, public institutions, and water and electricity lines. The investors putting their money in this kind of bonds not only benefit through returns but also contribute to the growth of the country.

With a maturity period of between 10 and 15 years, infrastructure bonds are one of the widely available investment options in the market today. They enable investors to safeguard their capital and minimize the volatility returns on their investment. After the lock-in period, the infrastructure bonds are listed on the stock exchange.

An infrastructure bond investor can also reduce the taxable income through the amount invested in the bond. Besides the existing deductions as set out by a country’s laws, investing in infrastructure bonds India would normally accord the investor an opportunity to benefit from additional deduction from the taxable income.

How to choose infrastructure bonds

At the least, an investor needs to compare the returns being provided by various investment banks issuing the infrastructure bonds and check out their credit rating. Experts opine that an investor should also keep in mind the latest financial performance of a company before buying its investment instruments. One may also not purchase based on Secured and Unsecured bonds because secured doesn’t mean any kind of guarantee – it simply means that the company has set aside some assets against this bond issue. If anything happens to the company then those assets will be sold to recover the money for the bondholders. That is all it means – it does not mean a guarantee from the company or the government of India that you will be repaid no matter what.

Lessons for Promising Marketplace

In Europe for instance, despite the challenging economic situation of the Union, the Europe 2020 Project Bond Initiative is set up to stimulate capital market financing for large-scale infrastructure projects; particularly in the areas of trans-European networks in transport and energy, as well as broadband telecommunications. The scheme operates by providing credit enhancement to project in infrastructure needs of the Union in transportation, energy, and telecommunication. The European Investment Bank (EIB) provides credit enhancement in form of a subordinate instrument (either a loan or a contingent facility) to support the senior debt issued by the project company.

In Emerging markets, the use of infrastructure bonds is on the rise. Indian Railway Finance Corporation Limited (IRFC) has issued its second tax-free bond as a public owned finance arm of the Indian Railway Corporation registered as an infrastructure finance company. Brazil has also commenced a spate of infrastructure concessions to boost its infrastructure with a specific focus on infrastructure bond financing.

Author’s Bio

Humble Craig in this piece looks at infrastructure bond India is being carried out and the major investment banking finance activities that take place. It’s a piece that educates its readers.