INVESTOR PRESENTATION TAX FREE BONDS

T AX F REE B ONDS H ISTORY AGENDA M ACROECONOMIC O UTLOOK 2

HISTORY

The Central Government introduced Tax Free Bonds in FY worth Rs.30,000 crs. Subsequently, 5 Public Sector Enterprises completed Public Issues and Private Placements to raise resources under these amounts with bonds in 10 and 15 year tenors. 4 National Highway Authority of India (NHAI) 10,000 Cr. Power Finance Corporation (PFC)4,033 Cr. Indian Railway Finance Corporation (IRFC) 6,300 Cr. Housing & Urban Development Corporation (HUDCO) 4,685 Cr. Rural Electrification Corporation (REC)3,000 Cr. The interest income is taxable/exempt. No TDS deducted at time of interest payment Tenure: Choice of 10 years and 15 years Proposed to be listed on NSE and BSE No lock-in period Secured issue Either in Demat or Physical form F EATURES The bonds are issued by good rated central PSU’s and are considered very safe. Interest earned is Tax exempt No cap on amount of investment eligible for tax benefits Can be sold in secondary market without any lock-in period Listed securities A DVANTAGES INTRODUCTION FY I SSUERS HISTORY

InstitutionalHNIRetailOverall Issue Size (in Rs. Cr) Times oversubscribed Issue Size (in Rs. Cr) Times oversubscribed Issue Size (in Rs. Cr) Times oversubscribed Issue Size (in Rs. Cr) Times oversubscribed NHAI 4, , , , PFC 2, , , , IRFC 2, , , , HUDCO 2, , , , REC 1, , The HNI category was oversubscribed in all the issues indicating huge demand from the segment. Most of the issues were oversubscribed on the first day. YIELD AND SUBSCRIPTION PATTERNS Subscription pattern last year NHAIPFCIRFCHUDCOREC Tenor10 years15 years10 years15 years10 years15 years10 years15 years10 years15 years Post Tax Coupon (Non retail)8.20%8.30%8.20%8.30%8.00%8.10% 8.20%7.93%8.12% Pre Tax yield (Individuals) 11.87%12.01%11.87%12.01%11.58%11.72% 11.87%11.48%11.75% (Corporates) 32.45% 12.14%12.29%12.14%12.29%11.84%11.99% 12.14%11.74%12.02% Effective Yield pattern last year 5

All the five issues of tax free bonds are trading at a premium on the exchanges A portfolio of with equal allocation in all 5 bonds would have yielded 4.5% in price gain The following table shows the absolute total post tax gains (Tax free coupon, accrued interest and Capital Gains) for the different bonds NHAIPFCIRFCHUDCOREC Days of investment Years11.5%10.5%8.8%8.6%7.3% 15 Years14.1%13.8%10.4%8.1%9.8% The performance is measured up to 7 th November, All prices taken from exchange platforms. Tax is assumed at 30.90%. No of days of investments assumes 30 days of investment to allotment. PERFORMANCE 6

TAX FREE BONDS

Tax free bonds have been continued to provide low cost long term finance to the public sector infrastructure space Issuers can raise resources under the tax free route through both private placement and public issues. Private placements are expected to begin in November where as Public issues would kick in from December The budget for FY had announced an amount of Rs. 60,000 crores under tax free bonds. The notification however provides for Rs. 53,500 crores tax free bonds to be issued by the following 8 SCHEDULE FOR FY Entities Aggregate Amount of Bonds (Rupees Crores) National Highway Authority of India (NHAI)10,000 Cr. Indian Railway Finance Corporation (IRFC)10,000 Cr. India Infrastructure Finance Company Limited (IIFCL)10,000 Cr. Housing and Urban Development Corporation (HUDCO)5,000 Cr. National Housing Bank (NHB)5,000 Cr. Power Finance Corporation (PFC)5,000 Cr. Rural Electrification Corporation (REC)5,000 Cr. Jawaharlal Nehru Port Trust2,000 Cr. Dredging Corporation of India500 Cr. Ennore Port Limited1,000 Cr.

TERMS OF THE ISSUE (1/2) Reference G Sec (RRate): Average of base yield of Government Security for equivalent maturity reported by FIMMDA prevailing for two weeks ending on Friday immediately preceding the filing of final prospectus. Retail Individual investorsQIBs, Corporates and HNIs Individuals, HUFs, NRIs investing up to Rs. 10 Lakhs AAA and AA+ RatedRRate - 65 bpsRRate bps AA Rated and belowRRate - 50 bpsRRate bps Ceiling on Coupon Eligible Investors Qualified Institutional Buyers, Corporates, High Networth Individuals, Retail Individual Investors Tenure10 years and 15 Years, (20 Years bond only in case of IIFCL) 9

TERMS OF THE ISSUE (2/2) 10 Years15 Years20 Years Average yield for 2 weeks ending %8.33%8.36% Annualized Yield8.32%8.50%8.53% Retail Individual investorsQIBs, Corporates and HNIs 10 Years15 Years20 Years10 Years15 Years20 Years AAA and AA+ Rated7.67%7.85%7.88%7.17%7.35%7.38% AA Rated and below7.82%8.00%8.03%7.32%7.50%7.53% Reference Rate Limit on Coupon Retail Investors Tax RateAAA & AA+AA & Below 0.00%7.67%7.82% 10.30%8.55%8.72% 20.60%9.66%9.85% 30.90%11.10%11.32% QIBs, Corporates and HNIs Tax RateAAA & AA+AA & Below 30.90% 10.38%10.60% 32.45% 10.62%10.84% Pre tax yields (for 10 Years at cap coupon rates) 10

SchemeTenorAnnual Interest Post tax return* Features/LiquidityTax Breaks DepositInterest Public Provident Fund (PPF) 15 years8.80% Withdrawal permitted only from 6th year, subject to restrictions. Sec 80C benefit Tax Free Fixed Deposits - National Housing Bank 5 years9.58% 6.71% Withdrawal before maturity is allowed at a charge Sec 80C benefit Taxable Fixed Deposits – SBI5 years8.50% 5.95% Withdrawal before maturity is allowed at a charge None None, TDS deductible Senior Citizen's Saving Scheme 5 years9.00% 6.30% 5 year tenure, minimum age 55, also available with public sector banks Sec 80C benefit Taxable National Saving Certificate 10 years8.90% 6.23% No Maximum limit of investment Sec 80C benefit Taxable but no TDS Post Office Time Deposit Account 5 years8.77% 6.14% 5 year tenure,, no max limit. Sec 80C benefit Taxable Tax Free Bonds 10 & 15 years (20 years for IIFCL) Refer slide #10 Same as annual int Liquidity, no max limit, no min age, Capital gains possible (slide #6) NoneNo TDS *Post tax return at tax bracket of 30%. The effect of Section 80C deduction is not taken in calculation of post tax returns. The above data has been extracted on 7 th November 2012 from respective websites of the issuers and other information available in news. COMPARABLE ALTERNATIVES 11

MACROECONOMIC OUTLOOK INTEREST RATE SCENARIO 12

MARKET OUTLOOK RBI KEEPS POLICY RATES UNCHANGED The Reserve Bank of India (RBI) in its mid-quarter review of monetary policy on 30 th October 2012 kept the repo rate and reverse repo rate unchanged at 8% and 7%, respectively. It reduced the CRR by 25 bps from 4.50% to 4.25%. The RBI continues to remain hawkish on inflation prospects in the short term. – On one hand the RBI sees pressures on food prices reducing through reduced rainfall deficit and resultant improvement in prospects for the Rabi crops. – While on the other hand, due to continued demand supply imbalances, the prices of protein items are expected to see some pressures. The upside risks are also expected to persist in short term due to recent hike in diesel prices as well as upward momentum seen in non-manufactured products inflation. As regards the next review, the uncertainty persists, and we would therefore expect the RBI to condition its response largely looking at the developments in global energy and commodity prices and its impact on domestic inflation dynamics. 13

14 GDP Growth Inflation 10 year G-sec Growth prospects for the economy expected to be revived by the wave of reforms introduced by the central government. Capital goods growth rate, an indicator of level of investment, has seen upward movement in recent months. IIP data in the past 2 months has seen upward movement. IMF forecasted that the economy will grow by 4.9% during The estimate by planning commission for first half of the year however stands at 5.5% and further deceleration is not expected. WPI inflation for September 2012 was recorded at 7.81%, higher than 7.55% seen in August 2012 Headline inflation has moderated from levels seen in the previous fiscal year but continue to be rather high. It can be expected to remain flat or increase slightly over the coming quarters. CPI inflation is expected to experience upward movement on account of hike in diesel prices. The benchmark has been stable in the range of 8.10% to 8.20% over the past one month. A higher fiscal deficit may increase the government’s borrowing requirement and push the 10-year G-sec yield higher RBI has been signalling time and again, that policy rates cuts are unlikely The Indian macroeconomic scenario is quite stagnant and hence rate cuts look imminent. Even RBI has signalled looking at the rates in the January- March quarter. No major events in the next 4-6 months are likely to affect the capital markets drastically. The Indian macroeconomic scenario is quite stagnant and hence rate cuts look imminent. Even RBI has signalled looking at the rates in the January- March quarter. No major events in the next 4-6 months are likely to affect the capital markets drastically. MARKET OUTLOOK

15 DISCLAIMER This document is issued by SBI Capital Markets Limited (“SBICAP”) for general information purposes only, without regard to specific objectives, suitability, financial situations and needs of any particular person and does not constitute any recommendation, and should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities mentioned therein, and neither this presentation nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. This presentation does not solicit any action based on the material contained herein. Nothing in this presentation is intended by SBICAP to be construed as legal, accounting or tax advice. Past performance is not a guide for future performance. Forward-looking statements are not predictions and may be subject to change without notice. Actual results may differ materially from these forward-looking statements due to various factors. This presentation and opinion, if any, contained herein have been prepared by SBICAP based upon information available to the public and sources, believed to be reliable. Though utmost care has been taken to ensure its accuracy, no representation or warranty, express or implied is made that it is accurate, authentic, fair, correct or complete. SBICAP has reviewed the presentation and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy, authenticity, correctness, fairness and completeness cannot be guaranteed. This presentation has not been approved and will or may not be reviewed or approved by any statutory or regulatory authority in India or by any Stock Exchange in India. This presentation may not be all inclusive and may not contain all of the information that the recipient may consider material. This presentation and information contained herein or any part of it does not constitute or purport to constitute investment advice in publicly accessible media and should not be printed, reproduced, transmitted, sold, distributed or published by the recipient without the prior written approval from SBICAP. The securities considered in this presentation have not been, and will not be, registered under the US Securities Act 1933 (“U.S. Securities Act”) or the securities laws of any state or other jurisdiction in the United States and may not be offered or sold, directly or indirectly, within the United States or to, or for the account or benefit of, "U.S. Persons" (as defined in Regulation S under the U.S. Securities Act), except pursuant to an exemption from or in a transaction not subject to registration requirements of the U.S. Securities Act and applicable state securities laws. The distribution of this presentation in other jurisdictions may be restricted by law, and persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions. Neither SBICAP and its affiliates, nor its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of this presentation. This presentation may contain confidential, proprietary and/or legally privileged information and it must be kept confidential by the recipient. Further, no representation or warranty, expressed or implied, is made or given by or on behalf of SBICAP or its affiliates, nor any person who controls it or any director, officer, employee, advisor or agent of it, or affiliate of any such person or such persons as to the accuracy, authenticity, completeness or fairness of the information or opinions contained in this presentation and SBICAP or its affiliates or such persons do not accept any responsibility or liability for any such information or opinions and therefore, any liability or responsibility is expressly disclaimed. This document is issued by SBI Capital Markets Limited without any liability / undertaking / commitment on the part of itself or State Bank of India or any other entity in the State Bank Group, except where it is explicitly stated. Further, in case of any commitment on behalf of State Bank of India or any other entity in the State Bank Group, such commitment is valid only when separately confirmed by that entity.

THANK YOU 16