Power Finance Corporation’s first tranche of NCDs (non-convertible debentures) with a base issue size of ₹500 crore and greenshoe option of ₹4,500 crore (total ₹5,000 crore) will open on January 15 and close on January 29. As much as 80 per cent of the NCD issue is being allocated for retail investors (40 per cent) and high net worth individual investors (40 per cent). To know more, read on.
About Power Finance Corporation (PFC)
PFC is the country’s largest infrastructure financing company dedicated to the power sector. Its shares are listed on stock exchanges.
Attractiveness of this public issue is that the offering is from the highest safety rated issuer with a sovereign character and market leader in its segment.
For PFC, this maiden NCD issue is a step towards further diversification of source of funds and intended to tap wider retail taxable bond segment.
Where would money from NCD be used
At least 75 per cent of the proceeds would go towards onward lending and financing/refinancing of existing debt.
NCD issue details
Each NCD has a face value of ₹ 1,000 each.
The NCDs are taxable, secured, and will be listed on Bombay Stock Exchange.
PFC is offering 7 options.
3 years fixed annual – Here you get 4.8 per cent annually.
5 years fixed annual – Here you get 5.8 per cent annually.
10 years fixed quarterly – Here you get 6.82 per cent annually. But the interest is paid on 4th day of every quarter.
10 years fixed annual – Here you get 7 per cent annually.
10 years floating annual – The company is offering Series V NCDs which carries floating interest rate based on FIMMDA 10Yr G-sec benchmark published by FIMMDA Reference. The specific spread for HNIs and Retail investors will be 80 basis points. So, you get annual interest based on the reference plus the spread.
15 years fixed quarterly – Here you get 6.97 per cent annually, but interest is paid out quarterly.
15 years fixed annual – Here you get 7.15 per cent annually.
As per the company, a majority of banks are offering rates from 4.5-6 per cent across tenors (up to ten years). NSCs are offering 5.8 per cent.
NCD ratings
The NCDs proposed to be issued under the issue have been rated ‘CARE AAA; Stable’ by CARE Ratings Limited (“CAREâ€); ‘CRISIL AAA / Stable’ by CRISIL Limited (“CRISILâ€); and ‘[ICRA]AAA(Stable)’ by ICRA Limited (“ICRAâ€).
Instruments with these ratings are considered to have the highest degree of safety regarding timely servicing of financial obligations and such instruments carry lowest credit risk.
These ratings are not a recommendation to buy, sell or hold the NCDs and investors should take their own decisions.
NCD securityÂ
The principal amount of the NCDs to be issued together with all interest accrued on the NCDs shall be secured by way of first pari passu charge through the hypothecation of the book debts/receivables (excluding the book debts / receivables on which a specific charge has already been created by PFC).
Taxation
Interest income on NCDs is taxable at your slab rate whether on pay-out or under the cumulative option. If you sell the bond in the exchanges in less than a year, short-term capital gains, at your tax slab, will be applicable. If you sell after a year of holding, then long-term capital gains tax without indexation will apply.
How to apply
An eligible investor desirous of applying in the NCD issue can make applications only through the Applications Supported by Blocked Amount (ASBA) process.
Category III or High Net-worth Individual Investors (“HNIsâ€) can apply for an amount aggregating to above Rs 10 lakh across all options of NCDs in the issue. Category IV or Retail Individual Investors can apply for an amount aggregating up to and including Rs 10 lakh across all options of NCDs in the issue.
Applicants can apply for any or all series of NCDs offered hereunder provided the applicant has applied for minimum
application size using the same application form.
If you would like to subscribe to Power Finance Corporation NCDs, contact Wealthzi team at [email protected] or open an account at www.wealthzi.com.
