PFC's tax-free bonds issue subscribed 12 times on Day 1

This is the second issue to get subscribed right on day one, the first NTPC's last month

Power Finance Corporation (PFC)’s Rs 700-crore tax-free bond issue was subscribed 12 times on the first day, owing to attractive pricing. The issue saw bids of about Rs 8,500 crore, according to BSE data. Last month, an NTPC issue was also subscribed on day one.

For bonds with maturity periods of 10 years, 15 years, and 20 years, PFC offered coupon rates of 7.11 per cent, 7.27 per cent, and 7.35 per cent a year, respectively.

“The secondary market yields on tax-free bonds are at least 15-20 basis points lower than what is being offered by PFC, due to which it was oversubscribed on day one. The pricing was frozen before the Reserve Bank of India (RBI)’s monetary policy review. As a result, the coupon rate was attractive,” said K P Jeewan, head of fixed income, Karvy Stock Broking.

Yields on government securities have dropped sharply, following a 50-basis point repo rate cut by RBI. “The fall in yields will be factored in the pricing of tax-free bonds to come now,” Jeewan said.

The PFC issue has been rated ‘AAA’ by rating agencies. AK Capital, Karvy Investors Servcies, Edelweiss Financial Services and RR Investors Capital were the arrangers for the issue.

This financial year, companies are raising Rs 40,000 crore through tax-free bonds. The government has allowed seven entities to raise funds through this route.