PFC to issue Rs 1,000-cr infra bonds by Dec-end
State-run Power Finance Corporation (PFC) will start issuing infrastructure bonds to retail investors by December-end. It is awaiting clarifications from the finance ministry and the Reserve Bank of India (RBI) before finalising the issue size.
A senior PFC executive said the company wanted to raise more than Rs 1,000 crore through bonds. Investors subscribing to the infrastructure bonds will be eligible for income tax exemption of up to Rs 20,000 a year under the recently introduced section 80CCF of the Income Tax Act.
The power financier had sought a clarification from RBI on the infrastructure bonds. The central bank had granted infrastructure financing company (IFC) status to PFC last month.
“The IFC status will allow us to issue infrastructure bonds, but since we are a non-deposit undertaking, we will have to seek a clarification from RBI on the issuance of bonds,” said the executive.
PFC, a non-banking financing company that provides loans for various power projects in the generation, transmission and distribution sector as well as for renovation and modernisation (R&M) of existing power projects, was earlier classified as a loan company. The company is raising money through both debt and equity routes in order to meet its funding requirement. It is also negotiating with peers in the power sector to float a bank. The move will ensure access to cheaper funds.
Issuance of infrastructure bonds would allow the company to get a cost advantage of 50-60 basis points and would help in reducing borrowing costs.
Besides, the company would also be raising fresh equity through a follow-on public offer (FPO) or qualified institutional placement (QIP) in the next six months. The Cabinet approval for raising fresh equity is expected to come soon.
The company’s board has already approved a proposal for a fresh issue of equity shares along with disinvestment, not exceeding in aggregate 20 per cent of the existing paid up share capital of the company, subject to approvals. At present, the government holds 89.78 per cent in PFC. The government had divested 10 per cent stake through an initial public offer (IPO) in 2007.
On the debt side, PFC will be raising $260 million from external commercial borrowings in 2010-11. The company has also conducted roadshows in Japan and China to raise an additional $240 million through foreign loans.
In March this year, PFC had raised $300 million from State Bank of India’s London branch.