Four months have passed from January 2012 till now since the National Highways Authority of India (NHAI) raised Rs 10,000 crore through a bond issue but stock brokers are still waiting for their commission payouts. Considering brokers charge a commission of 0.4-0.5 per cent, NHAI will have to pay Rs 40-50 crore on the amount.

As per Business Standards Report: In January, NHAI’s non-taxable bonds had run into a controversy, with the Planning Commission accusing it of robbing the national exchequer of Rs 110 crore by handing out ‘excessive commissions’ to lead managers. Following the controversy, the finance ministry is set to issue strict guidelines on tax-free infrastructure bonds this financial year, on matters concerning brokerage, commission and spending on advertising. The ministry also favours fixing of coupon rates for infra bonds, to make sure these are not too high.

However, paying a commission to brokers is crucial for NHAI, as it plans to launch another mega bond issue during the end of 2012, say market players.

J N Singh, member (finance) at NHAI, said, “The company is waiting for data from lead managers and will release the money in a week or two.”

The bond issue, a big hit with investors, was conducted during the first week of January. It closed for subscription over a week ahead of its original closing date, due to large subscriptions from high net worth individuals (HNIs) and institutions. Demand from HNIs rose to Rs 8,120 crore against Rs 3,000 crore of bonds on sale. The institutional category saw demand for Rs 24,533 crore against Rs 4,000 crore for sale. Though NHAI proposed to issue Rs 5,000 crore, it ended up raising Rs 10,000 crore with an over-allotment option, as it got subscribed to the extent of Rs 25,000 crore, despite shaky market conditions.

The Planning Commission had sought enquiry into a possible “malfeasance or negligence” by NHAI in handing out higher commission to the bond managers – SBI Capital Markets, AK Capital, Kotak Mahindra Bank and ICICI Securities — on investments by qualified institutional buyers and HNIs. Gajendra Haldea, advisor to the Commission, had written to the finance ministry and the roads ministry, which said while a comparatively higher commission may have been justified for retail investors, there was simply no case for such high commissions in the case of large investors.

“Such large commissions were clearly unnecessary because the investors neither needed any persuasion, nor any substantive services. Besides a large burden on the public exchequer, such high commissions also have a potential for corruption and malpractices,” Haldea had written.

Following this, the road transport and highways ministry asked NHAI to explain. “We have made several attempts to talk to the company and lead managers with regard to the pending commission but it has not yielded any results. There is a worry now that the commissions may not come,” said a broker here.

Brokers play an important role in primary markets due to their personal touch with HNIs and retail investors. In many cases, they also fund investors for subscription by charging short-term interest. Of the 0.4-0.5 per cent commission collected by brokers, half is passed on to sub-brokers.