REC Ltd.

Rural Electrification Corporation (REC) plans to raise funds through issuance of deep discount bonds in the current financial year, besides raising Rs 1,000-1,500 crore through infrastructure bonds. The company plans to issue 10-year deep discount bonds, also known as zero coupon bonds, in the last quarter of 2010-11. The face value of these will be Rs 3,000-4,000 crore, while the redemption value will be about Rs 7,500 crore.

This April, the government had approved its plan for issue of 2.5 million deep discount bonds with maturity value of Rs 30,000 each for a 10-year period, by March 31, 2011. The income from such bonds will be taxed as capital gain only on transfer or redemption or maturity.

The company also plans to come out with its infrastructure bonds by December or January and is likely to raise Rs 1,000-1,500 crore from the issue. Subscribing investors would be eligible for income tax exemption up to Rs 20,000 a year under the recently introduced Section 80CCF of the Income Tax Act.