Power Finance Corporation Ltd (PFC), one of the leading financial institutions in India focused on the power sector, will open its Rs 5,000 crores public issue of secured, redeemable non-convertible debentures (NCD) on January 15, 2021.
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 crores. The NCDs are of face value of Rs 1,000 each. The Tranche I Issue is scheduled to close on January 29, 2021 with an option of early closure or extension as decided by PFC’s Board of Directors or a duly constituted committee thereof.
The Tranche I Issue offers options for tenures of 3, 5, 10 and 15 years. The 3-year tenure NCD in Series I will offer a fixed coupon rate of 4.65% p.a to 4.80% p.a., while the 5 year tenure NCD in Series II will offer fixed coupon rate of 5.65% p.a. to 5.80% p.a. depending on the category of investors. The 10-year tenure NCDs offers options of both fixed and floating rates of interest. The fixed coupon rate is 6.63%p.a. to 7.00% p.a.
The floating coupon rate, on the other hand, is based on Benchmark FIMMDA 10Yr G-Sec (Annualised) + spread of 55 basis points to 80 basis points, subject to floor and cap rate depending on the category of investors. The 15-year tenure NCD offers a range of fixed coupon rates with maximum coupon rate of 7.15% p.a.
The minimum application size is for 10 NCDs aggregating to Rs. 10,000 collectively across all series of NCDs and in multiples of One (1) NCD of face value of Rs. 1000 each thereafter.
High credit rating
The NCDs proposed to be issued under the Issue have been rated ‘CARE AAA; Stable’ by CARE Ratings Ltd, ‘CRISIL AAA / Stable’ by CRISIL Ltd (“CRISIL”); and ‘[ICRA]AAA(Stable)’ by ICRA Ltd. NCDs with these ratings are considered to have the highest degree of safety regarding timely servicing of financial obligations and such instruments carry lowest credit risk.
General lending
Interacting with the media via a digital conference on January 14, 2020, Ravinder Singh Dhillon, Chairman & Managing Director, Power Finance Corporation, said that proceeds of the issue will be used for general lending purpose. This general lending to the power sector would include power transmission & distribution (T&D) projects, renewable energy and state-owned power distribution utilities, among others, Dhillon said.
The top official explained that since a major portion of the issue would be reserved for the general public, small investors would stand to earn higher interest from these NCDs, as compared with options currently available.
For FY21, PFC plans to borrow around Rs.1,00,000 crore from the market by way of debt instruments, out of which Rs.67,000 crore has been raised so far, Dhillon observed.
Featured photograph shows Ravinder Singh Dhillon, CMD, PFC (centre), flanked by P.K. Singh, Director – Commercial and Ms Parminder Chopra, Director – Finance, addressing the virtual press conference on January 14, 2021.
