Mumbai, Oct. 14: L&T Infrastructure Finance Company Ltd (L&T Infra) is raising up to Rs 700 crore through the issue of long-term infrastructure bonds.

The company, promoted by Larsen & Toubro (L&T), is following closely on the heels of IDFC Ltd which floated a similar instrument that qualifies for benefits under Section 80 CCF of the Income Tax Act.

L&T Infra will be issuing bonds of up to Rs 200 crore with an option to retain over-subscriptions of up to Rs 500 crore. The bonds will be in the nature of secured redeemable non-convertible debentures.

Under Section 80 CCF, investments up to Rs 20,000 made by resident individuals in long-term infrastructure bonds are eligible for deduction in computation of taxable income for 2010-11.

This will be over and above the Rs 1 lakh in other instruments. The issue will remain open for subscription from October 15 to November 2. Proceeds from the issue will be used for infrastructure lending.

The bond issue from L&T Infra comes just a day after IDFC announced that it is extending by four days till October 22, its issue of infrastructure bonds.

Senior officials of L&T Infra told reporters here today that they were confident that the issue would receive a good response from investors.

The bonds will have a maturity period of 10 years. Investors will get an earlier exit option with the company offering a buyback facility at the end of 5 years and 7 years from the date of allotment.

Each bond will have a face value of Rs 1,000 and will be issued at par. Applicants will have to subscribe to a minimum of five bonds. L&T Infra is offering an interest rate of 7.50 per cent and 7.75 per cent on the bonds.

The bonds will also be listed on the National Stock Exchange after the lock-in period of five years, thereby providing liquidity to the investor. After this lock-in period, holders can also pledge the bonds with banks to get finance.

L&T Infra is coming out with four series of bonds, offering subscribers options of annual or cumulative interest payment and buyback after 5 years or 7 years.

Officials of the company said yield to the investor (if one were to include the tax benefits) will work out to as high as 17.20 per cent, depending on the income-tax bracket of the individual.

Excluding the tax-benefits, the yield to the investor on maturity will be as high as 13.58 per cent for those in the highest income-tax bracket.