Power Finance Corporation to Raise ₹100 Billion Through Bonds Issue

The country’s biggest lender to the power sector, the Power Finance Corporation (PFC), will raise ₹100 billion (~$1.36 billion) through bonds in two tranches. According to the company’s prospectus, the first tranche of ₹50 billion will open for subscription on January 15 and close on January 29.

Until now, PFC had been selling tax-free infrastructure bonds to retail investors. The latest bonds issue is its maiden taxable issuance to individual buyers.

At least 75% of the proceeds would go towards onward lending and financing/refinancing of existing debt and debt servicing. The interest rate for institutional and non-institutional investors will be 4.6%, 5.65%, and 6.78-6.95%, respectively, for bonds of three, five, and 15-year tenure.

The ten-year bond for this set of investors will fetch 6.53 to 6.80 percent interest.

PFC has been at the forefront of providing finances to India’s power sector, including renewables. The ₹900 billion (~$12.03 billion) stimulus package announced by the government for the power distribution companies is also routed through PFC. The other financial institution that is to disburse half of the funds other than PFC is REC Limited. PFC approved ₹306.07 billion (~$4.09 billion) as of July 31, 2020, as part of the liquidity package for DISCOMs.

PFC is also one of the lenders from whom renewable energy developers can obtain letters of undertaking that can be used as bank guarantees in tenders. Such letters will serve the same purpose as a bank guarantee issued by any public sector bank. The terms and conditions would also be similar to any bank guarantee that promises to pay the procurer on demand within a given timeline.

In September 2020,  Mumbai-based power transmission company Sterlite Power had secured the financial closure for its Vapi II North Lakhimpur Transmission Limited. The total debt funding of ₹20.7 billion (~$281 million) had come from PFC.

PFC has also announced ₹1.5 billion (~$20.4 million) for providing a common backend infrastructure facility to distribution companies for faster roll-out of smart meters in the country.