New Delhi, Sept. 21: NTPC's Rs 700-crore public issue for tax-free bonds will open on Wednesday, of which 40 per cent, or Rs 280 crore, will be reserved for retail investors.

Earlier in July, the government had approved the state-run power utility's plan to raise Rs 1,000 crore through tax-free bonds, including Rs 700 crore through public issue.

NTPC was among the seven state-run entities, including the National Highways Authority of India (NHAI) and Indian Railway Finance Corporation Ltd, which were given permission to raise Rs 40,000 crore in the current fiscal through tax-free bonds.

"Forty per cent of the issue, that is Rs 280 crore, is reserved for the retail category. The remaining issue will be for non-retail investors, including QIBs (qualified institutional buyers), corporates and high net-worth Indians," NTPC director (finance) K. Biswal said.

He further said, "For a person in the 30-per-cent tax bracket, the effective yield is 10.88 per cent in the 20-year option. The coupons (rates) are attractive than the returns from FDs (fixed deposits), which hover in the range of 7.5-8.75 per cent per annum for various maturities," Biswal said.

The issue has three tenures - 10 years, 15 years and 20 years. For retail investors, the coupon rate is 7.36 per cent for 10 years, 7.53 per cent for 15 years and 7.62 per cent for 20 years. For non-retail investors, the coupon rate is 7.11 per cent for 10 years, 7.28 per cent for 15 years and 7.37 per cent for 20 years.

The NHAI has been given the largest allotment at Rs 24,000 crore, while Hudco has been permitted to raise Rs 5,000 crore.

NTPC requires funds mainly to expand its generation capacity. It expects renewable energy to contribute 28 per cent to its capacity of 128,000MW by 2032.

The Indian Renewable Energy Development Agency has been allowed to raise Rs 2,000 crore. Power Finance Corporation, Rural Electrification Corporation and NTPC could raise Rs 1,000 crore each.