Power Finance Corp raises up to Rs 6,100 cr via 20-month, 10-year bonds

Pricing at higher-yield level due to hardening of G-secs

Power Finance Corporation (PFC) has raised Rs 6,100 crore through a blend of medium-term (22 months) and long-term bonds (10-year) for onward lending in the key infrastructure sector.

Bond market sources said being an AAA-rated public sector company, the demand for bonds was healthy. For the 10-year bonds, base issue was of Rs 500 crore with a green shoe option of Rs 2,500 crore. The entire issue was consumed. The coupon for 10-year paper was fixed at 7.57 per cent.

The coupon was fixed at a higher rate, reflecting hardening of yield on government bonds by over 10-basis points (bps) in the last two weeks.

The yield on the Government of India 10-year bond, benchmark paper, was ruling around 7.04 per cent in the second half of June. This month, it moved up to 7.15-16 per cent on concerns over rate hikes and inflation.

However, they softened on Monday at 7.13 per cent, according to Clearing Corporation of India data. While yields have hardened on G-secs, the spread over it for corporate bonds like PFC paper has remained within the 30-40 bps range, bond dealers said.     

For the 22-month paper, the base issue size is Rs 600 crore with a green shoe option of Rs 2,500 crore. The coupon was fixed at 7.53 per cent.

According to CRISIL, PFC’s borrowing costs are competitive and the resource base, though wholesale, is diversified. Its debt instruments have wide market acceptability, which is also reflective in its low cost of borrowing compared to peers.

The ratings continue to reflect the strategic importance of PFC to the government.

This is given the key role the company plays in financing the power sector and majority ownership by the government. The ratings also factor in a strong market position and adequate capitalisation and resource profile.

These strengths are partially offset by inherent vulnerability of the asset quality to the weak credit risk profiles of borrowers and significant sectoral and customer concentration in revenue, CRISIL said.