Power Firms In Float Mode

The Power Finance Corporation (PFC) and Power Grid Corporation of India Ltd (PGCIL) will soon tap the market to raise Rs 2,100 crore and Rs 539 crore, respectively, via long-term bonds.

PGCIL had last month raised Rs 761 crore through 14-year bonds at a coupon of 10.90 per cent.

The PFC bonds have been assigned a 'Laaa' rating, indicating highest safety, by Icra. The rating agency has assigned a similar rating to PGCIL's long-term borrowing programme.

The rating on PFC reflects its sovereign ownership and strategically important role in financing power projects in the country.

The rating also takes into account PFC's stable profitability, strong capital adequacy and its demonstrated ability to improve its collection efficiency despite the fundamentally weak credit quality of most of its borrowers, Icra said in a release.

 

As on March 31, 2001, PFC had an outstanding loan portfolio of Rs 12,930 crore.

According to Icra, in the future PFC's lending rates could come under pressure as the better-performing state electricity boards (SEBs) could raise funds directly or from other banks and financial institutions.

However, as the Centre provides four per cent interest subsidy on power projects governed under the accelerated generation and supply programme and this subsidy is routed only through PFC, Icra expects the institution to be able to maintain its competitive position and retain the better-performing SEBs as its clientele.

In the case of PGCIL, the rating takes into account its status in the Indian power sector as a monopoly responsible for providing long distance high voltage transmission and national grid management.