State-run Power Finance Corp (PFC) has launched a public bond issue to raise up to ₹5,000 crore, marking a strategic shift after cancelling multiple private bond sales due to market volatility. The issue, which runs for two weeks from January 16, represents the company's first public bond issuance in 30 months.

Issue Structure and Size

The public debt issue comprises an initial offer of ₹500 crore, extendable by up to ₹4,500 crore through a greenshoe option. This structure provides PFC with flexibility to adjust the final issue size based on investor demand and market conditions.

Background: Cancelled Private Issues

PFC withdrew three consecutive private bond issuances over November and December due to volatile interest rates. These fundraisings were scrapped despite the Reserve Bank of India lowering its policy rates by a quarter percentage point in December. "There was some volatility and we wanted the market to settle down before tapping it again," said Parminder Chopra, chairman and managing director of Power Finance Corp.

Strategic Shift to Retail Investors

The decision to launch a public issue reflects PFC's strategy to diversify its investor base. "The main reason to bring out a public bond is to bring this issue to retail investors as we see it as a strong avenue to mobilise domestic funds," Chopra explained. This approach allows the company to tap into a broader investor pool beyond institutional players.

Bond Terms and Pricing

PFC is offering bonds across multiple maturities with competitive coupon rates for different investor categories:

Additionally, PFC has introduced a zero-coupon option for investors with a 10-year and 1-month maturity, offering differentiated yields:

Cost Benefits and Market Conditions

Under the current public issuance, PFC is effectively lowering its borrowing costs by 10 to 25 basis points compared to previous attempts. The company had scrapped a five-year privately placed bond issue in late December that would have carried coupons of 6.95% to 7.25%. Corporates withdrew from raising debts after the 10-year government bond yield, which serves as the benchmark for corporate borrowing, rose about 10 basis points to 6.62% since the RBI cut rates in early December.

Chopra also noted that the company has been utilising the term loan market amid volatile bond rates. "Term loans are available at attractive rates and have been cheaper by 50-70 basis points than bond rates," he said, highlighting PFC's flexible approach to funding across different market conditions.

Power Finance Corporation has announced the launch of a ₹5,000 crore secured non-convertible debenture (NCD) offering, marking a significant debt fundraising initiative by the state-owned power sector financier. The announcement represents a substantial capital raising exercise through secured debt instruments.

NCD Offering Details

The company has unveiled this secured NCD issue as part of its debt fundraising strategy. The offering involves non-convertible debentures, which are debt instruments that cannot be converted into equity shares.

Strategic Capital Initiative

This NCD offering represents Power Finance Corporation's approach to accessing debt capital markets for its funding requirements. The secured nature of these debentures provides additional security to investors through underlying collateral backing.

The ₹5,000 crore issue size indicates the substantial scale of the company's capital raising plans. Non-convertible debentures serve as an important debt instrument for corporate fundraising, offering fixed returns to investors without equity conversion features.

Company's Debt Strategy

Power Finance Corporation's decision to launch this secured NCD offering reflects its strategic approach to debt financing. The company operates as a key financier in India's power sector, requiring substantial capital resources to support its lending operations and business expansion.