PFC set to launch maiden retail bond issue today
L eading power sector lender Power Finance Corporation (PFC) is launching its maiden public bond sale for retail investors on Friday to raise ~5,000 crore. These will be secured, redeemable non-convertible debentures (NCDS) with a face value of ~1,000 each.
The company said in a statement that the base issue size is ~500 crore, with an option to retain over subscription of up to ~4,500 crore aggregating up to ~5,000 crore, which is within the shelf limit of ~10,000 crore. Allotment would be on first come, first serve basis and the first tranche is scheduled to close on January 29, 2021.
The category of investors is divided into four — of the total issuance, 40 per cent is earmarked for retail and high net worth individuals (HNIS) each, while the rest is for institutional and non-institutional investors.
In the first tranche, PFC is offering tenures of three, five, 10, and 15 years. The three-year tenure NCD will have a fixed coupon rate of 4.65-4.8 per cent per annum (p.a.). The five-year tenure NCD will offer a fixed coupon rate of 5.65-5.80 per cent p.a., 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. The floating coupon rate will have a spread of 55 basis points (bps) to 80 bps, subject to floor and cap rate depending on the category of investors, said a statement by the firm. The 15year tenure NCD offers a range of fixed coupon rates with maximum coupon rate of 7.15 per cent p.a.
Parminder Chopra, director (finance), PFC, said the floating coupon rate is based on benchmark FIMMDA (fixed income money markets and derivatives association) 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 ~7.2 trillion and made ~1.24 trillion worth of disbursements. For FY21, an annual borrowing plan of ~1.80 trillion was earmarked, of which ~67,000 crore was mobilised till September.
PFC executives said the proceeds will go towards funding projects in the power sector, especially aimed at upcoming projects in the renewable energy and transmission and distribution segments.
“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 and 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, CMD, PFC.
Responding to a query on the choice of retail bond as the market battles the pandemic-induced slowdown, Dhillon said there are few attractive investment avenues available for retail investment and this issuance is one such. “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.