NaBFID will issue 2 million zero-coupon bonds with an issue value of ₹10,286.12 crore. Investors will receive the full redemption amount at the end of the 10-year tenure.
“As part of our diversified resource raising strategy, the institution is evaluating a range of instruments available in the market, including the potential issuance of zero-coupon bonds in due course,” an official spokesperson said in response to ET’s queries.
Last week, the Central Board of Direct Taxes (CBDT) approved the tax framework required for NaBFID to issue the bonds by March 31, 2028. The tax recognition is subject to NaBFID fulfilling conditions prescribed under the Income-tax Act and Rules.
The CBDT approval is a regulatory recognition of the bond structure, and NaBFID will have to separately undertake the issuance process, including finalising issue terms and timelines, officials said.
“This clears the road for NaBFID to issue zero-coupon bonds and the window will be open till March 31, 2028, so there is enough room to decide on timing,” a senior official told ET on condition of anonymity.
Unlike conventional bonds that pay periodic interest, zero-coupon bonds are issued at a discount and redeemed at face value on maturity. The difference between the issue price and redemption value represents the investors’ return.
Notified zero-coupon bonds offer tax certainty by bringing the discounted issue under a specific tax framework, instead of leaving the return to be characterised under the general provisions applicable to debt instruments. For issuers, the discount is recognised as interest cost for tax purposes over the tenor of the bond.
Established in 2021, NaBFID is an infrastructure-focused development finance institution, mandated to provide long-term financing support for infrastructure development across sectors including roads, renewable energy, power transmission, airports, ports, urban infrastructure and digital infrastructure.