Power Finance Corporation (PFC) plans to raise about Rs 40,000 crore in the next financial year. It aims to raise about Rs 3,000 crore through domestic corporate bonds. The bond issue of the government-owned non-banking financial company opened today and would close tomorrow.
Chairman and Managing Director Satnam Singh said, “We aim to raise a minimum of Rs 150 crore through this issue. However, we have kept a greenshoe option (option to allot additional shares) and should be able to garner up to Rs 3,000 crore. The response to the issue would decide whether or not we bring out more bond issuances this financial year.”
Bonds with tenors of five and 10 years would be issued, with options to buy (call option) or sell (put option) a specified amount of a security at a specified price and within a certain period. Investors can chose from three options — five-year bonds with a put and call option after 18 months and a coupon rate of 9.61 per cent, five-year, 18-day bonds with a put and call option of three years and a coupon rate of 9.66 per cent and 10-year bonds with a coupon rate of 9.48 per cent.
The company has raised about Rs 32,000 crore in the financial year 2011-12. The funds raised in the next financial year would help fund various power projects across the country. PFC is one of the biggest fund raisers in the country. It is likely to be allowed to issue tax-free bonds in the next financial year.
“The Budget has broadly said the power sector would be given an issuance limit of Rs 10,000 crore for tax-free bonds, and we are hopeful we would also get a substantial share of this limit,” Singh said. Corporate bond yields are expected to remain high in the coming months, and tax-free bonds may be able to provide some cost benefit to issuers.
PFC has also been planning its $1-billion medium term note issue. Singh said, “We had been waiting for the Budget to be announced, for the uncertainty to be over. Now that the Budget is out, we have revived our talks with merchant bankers.”
However, with the financial year drawing to a close, the medium-term note issue may spill over to 2012-13, he added.