Power Finance Corp to launch maiden public bond sale for retail investors

PFC is planning to raise Rs 5,000 crore in the first tranche, proceeds to be used for funding projects in the renewable energy and transmission & distribution segment

Leading power sector lender Power Finance Corporation (PFC) will launch its maiden public bond sale for retail investors to raise Rs 5,000 crore. PFC will open its public issue of secured, redeemable Non-Convertible Debentures (NCD) on January 15, 2021.

The NCDs are of face value of Rs 1,000 each. The company in a statement said the base issue size is Rs 500 crore with an option to retain oversubscription of up to Rs 4,500 crore, aggregating up to Rs 5,000 crore, which is within the shelf limit of Rs 10,000 crore. Allotment would be on first come, first serve basis and the first tranche is scheduled to close on January 29, 2021.

This paper recently reported PFC will raise Rs 1.18 trillion this financial year and also tap the domestic retail bond market. 

The investors are divided into four categories. Out of the total issuance, 40 per cent of the allocation is earmarked for retail and high-net worth individuals (HNIs) each. The remainder is for institutional and non-institutional investors.

In the first tranche of issuance, PFC is offering tenures of 3, 5, 10 and 15 years. The 3-year tenure NCD will have a fixed coupon rate of 4.65-4.8 per cent per annum (pa). The 5-year tenure NCD will offer a fixed coupon rate of 5.65-5.80 per cent pa depending on the category of investors. The 10-year tenure NCDs offer options of both fixed and floating rates of interest. The fixed coupon rate is 6.6-7 per cent pa.

The floating coupon rate will have a spread of 55 basis points to 80 basis points, subject to floor and cap rate depending on the category of investors, said a statement by the company. The 15-year tenure NCD offers a range of fixed coupon rates with maximum coupon rate of 7.15 per cent pa.

Parminder Chopra, director (finance), PFC, said the floating coupon rate is based on Benchmark FIMMDA 10 year G-Sec (annualised). “These bonds have the highest safety credit rating. There are three options for the investors – quarterly interest payment for those who want regular income, then 10-year annual interest payment also and apart from that investors who want their savings pegged to the market benchmark rate, a floating option has also been introduced,” said Chopra.

As on September 30, PFC had an asset base of Rs 7.2 trillion and had made Rs 1.24 trillion disbursements. For the 2020-21 fiscal year, an annual borrowing plan of Rs 1.80 trillion was earmarked, of which Rs 67,000 crore has already been mobilised till September.

PFC executives said the proceeds will go in funding different projects in the power sector, especially aimed at upcoming projects in the renewable energy and transmission & distribution segment.

“PFC is focusing on diversifying its sources of funds. We have significantly increased the foreign currency raising from reputed global investors across the US, Europe and Asia. In the retail tax-exempt segment, PFC has issued infrastructure & tax free bonds. Since 2017 PFC has also issued capital tax bonds and also increased lending under 54EC (capital gains bonds) segment,” said R K Dhillon, chairman and managing director, PFC.

Responding to a query on the choice of retail bond as market battles pandemic slowdown, Dhillon said, there are few attractive investment avenues available for retail investment and this bond issuance is an attractive opportunity for investors. “Interest rates under available options like fixed deposit and small savings schemes are quite low in the current market scenario. We did public issue to provide investors better yield and varied tenures. Offering is from the highest safety rated issuer with a sovereign character and market leader,” he said.

The lead managers to the issue are Trust Investment Advisors Private Limited, AK Capital Services Limited, Edelweiss Financial Services Limited and JM Financial Limited. The bonds have been rated ‘AAA; Stable’ by CARE Ratings, CRISIL Ltd and ICRA Ltd.