To help government’s Bharatmala road project, National Highway Authority of India (NHAI) sells long tenure bonds to country’s biggest debt buyer Employees’ Provident Fund Organisation (EPFO) and borrowed Rs 5,000 crore to aid the government’s road project.
These bonds will mature in 15 years, but those securities have a call option after 10 years, allowing the borrower to end the liability well before the scheduled redemption. The top-rated public sector company has sold corporate bonds that carry a coupon of 7.64%.
“Our portfolio managers are under direction to use the best of the investment opportunities whenever available,” according to VP Joy, the central provident fund commissioner, told, “We ensure our proposed rates of return across rate cycles through prudent investments.”
The EPFO has more than 50 million subscribers, and the rate of interest on provident fund deposits for this financial year will be decided by EPF Organisation at its meeting of trustees.
The latest drop in the benchmark government bond yield has helped borrowers raise money at relatively cheaper rates. It fell 16 basis points to 6.89% on Monday, a day after Moody’s upgraded India’s sovereign rating after 13 years.
In December last year, the EPF rate was lowered to 8.65% for 2016-17 from 8.8% a year earlier.