In a significant financial development, the Housing and Urban Development Corporation Ltd (HUDCO) has received approval from the Central Government to issue zero-coupon bonds worth ₹5,000 crore. This move aims to bolster capital for infrastructure development across the country.
HUDCO will issue five lakh zero-coupon bonds with a tenure of 10 years and one month. The bonds must be issued on or before March 31, 2027. While the total maturity value of the issue is pegged at ₹5,000 crore, the bonds will be sold at a discounted price of ₹2,351.49 crore, highlighting their zero-coupon structure.
As per the terms of issuance, the proceeds will be strictly allocated to revenue-generating infrastructure projects capable of servicing the debt independently, without requiring financial support from State Governments.
What are Zero-coupon bonds?
Unlike traditional bonds, zero-coupon bonds are debt securities that don’t pay periodic interest (coupons) like traditional bonds. Instead, they are sold at a discount to their face value, and the investor’s profit comes from the difference between the purchase price and the face value received at maturity.
Investors buy zero coupon bonds at a deep discount from their face value, which is the amount the investor will receive when the bond “matures” or comes due.
About HUDCO
HUDCO, a Central Public Sector Enterprise under the Ministry of Housing and Urban Affairs, plays a critical role in financing housing and urban infrastructure projects across India. The corporation was recently granted Navratna status on April 18, 2024, a designation that provides it with enhanced financial and operational autonomy.
This bond issuance is expected to significantly enhance HUDCO’s ability to fund self-sustaining urban infrastructure projects and represents a strategic step forward in India’s ongoing efforts to modernize urban development through innovative, market-linked financial instruments.