Power Finance Corp and its subsidiary Rural Electrification Corp are set to raise up to Rs 20,000 crore through their first retail taxable-bond sales, helping inject a fresh lease of life into the moribund public issuance market.
Each of the power project financiers could raise Rs 10,000 crore. They have appointed about half a dozen arrangers to help raise the funds, three people with direct knowledge of the matter said. The state-owned financiers could raise the funds in two or three installments.
“These two proposed public bond sales should revive the sentiment as investors now trust only government-owned entities,” a senior executive aware of the issuance plans told ET.
Public bond sales have taken a hit this year after a series of bond defaults dented investor sentiment. Wealthy and individual investors have stayed away from subscribing to debt papers sold by privately held NBFCs. Even top-rated financiers such as Mahindra Finance or Shriram Transport Finance have faced financing-cost escalations. Bond yields in these sales are expected to be in the range of 7-7.70 per cent. The benchmark now yields 6.72 per cent. Maturities are likely to be long-term of 7-to-10 years. Some may even stretch up to 15 years.
Trust Capital, AK Capital, JM Financial, and SBI Capital are some of those arrangers.
“The final terms are being finetuned and the REC sale may come up first, perhaps toward this month end,” said one of the persons cited above.
PFC and REC had earlier raised money via public issuances, but those were through tax-free bonds. Both companies are frequent issuers of bonds, but those instruments are generally placed privately. Power Finance Corp recently completed the process of acquiring REC. The combined entity will create a lending entity with about $80 billion in assets.
“Our company proposes to utilise the funds raised through this issue for the purpose of onward lending, financing / refinancing the existing indebtedness of our company, and/or debt servicing (payment of interest and/or repayment/prepayment of interest and principal of existing borrowings of our company),” PFC had said in its prospectus issued earlier.
The company is said to have approached the market regulator for clarity on an operational matter before starting the bond sale.
Source: Economic Times