Power Finance Corporation NCD opens today; offers interest up to 7.5%

Power Finance Corporation (PFC) is looking to raise up to Rs 5,000 crore through the public issue of non-convertible debentures (NCDs) that will open for subscription on July 21, 2023. In an interview with Tanya Aneja of BTTV, Parminder Chopra, Chairman and Managing Director (CMD) of Power Finance Corporation (PFC), talks about the firm’s plans. Edited excerpts: 

BT: What kind of returns can investors expect from PFC NCD?
PC: This is a public issue of bonds, so we thought of bringing it in three tenders. It is an investment opportunity for 3 years, 10 years and 15 years. The interest rates are in the 7.45%-7.50% range for 3 years. For 10 years, it is 7.53%, and for 15 years the coupon rate is 7.55%. So, our focus is on retail, we have allocated the proceeds 40% each for HNIs and retail. 

For institutional investors and non-institutional investors like corporations, the interest rates and coupons are slightly lower. For three years it is 7.45%. For 10 years it is 7.47% and for 15 years it is at 7.50% and the allocation for both categories is 10% each. 

The minimum investment is Rs 10,000 and further in multiples of Rs 1000 each. So, as you rightly said it is a base issue of is Rs5,000 crore with an option for the issue up to Rs4,500 and these will be secured, redeemable rated and taxable bonds will be listed on the Bombay Stock Exchange. 

BT: How is the loan mix evolving and how much of the loan book would be towards government and private lending as of now?
PC: PFC 31st March 2023 PFC has a loan book of approximately Rs4.22 Lakh crore. If you talk of the bifurcation between the government and the private sector, 83% outstanding is from the government sector and 17% is from the private sector. Talking about the loan 12% of the loan book is renewable and 42% is from conventional generation. 

BT: If you talk about asset quality, the stressed assets have reduced significantly over the past few years. But how is the asset quality trend expected to pan out in FY 24? 
PC: Yeah, you rightly said that it has improved a lot from, even if I talk in absolute numbers from Rs 30,000 Crore. It's just now Rs 15,000 crore and with a sufficient cushioning of approximately 72%. The stressed assets NPA ratio is only 1.07%. I would like to share with you that in the past year, we have not added any new NPA and going forward also, we are expecting our loan book to remain OK. 

BT: PFC is looking to diversify its loan book and, you know, venture into funding road infrastructure projects. So can you tell us about that? 
PC: PFC has been framed primarily to fund the power sector only. So traditionally, we have been funding the power sector. We are looking for funding for the ports, airports, metros, refineries, and roads. 

BT: what is your outlook as far as power sector is concerned? 
PC: The power sector is maturing day by day. There were issues at one point in time, related to the capacity generation capacity in the power sector. We are happy to share that we are able to meet the peak load demand successfully. Transmission issues have also been resolved over a period of time. But definitely with the expansion of the power sector, there will be an additional requirement for the transmission system in the dis distribution sector was the one which is the last leg in the power sector and on the other hand, has a direct interface with the consumers and is quite sensitive if we talk of the public welfare. 

So a lot of work is being done for improvement in the infra sector. And a lot of schemes have been introduced by the government of India to make the overall sector viable. So if we are able to succeed in this, then definitely viability of the whole sector will be much better as compared to earlier times for this government of India scheme of revamped the distribution scheme that is going to be the milestone and will lead to a turnaround of the sector. 

BT: What kind of business growth are you expecting going ahead?
PC: If we talk about FY 24 last year PFC’s loan book has grown by 13%. So there was a lull period for two years. Because of covid, the construction work was not much. The groundwork was not picking up. So disbursements stopped at that point in time, But we hope that now the scenario is much better. A lot of work is going on and we hope to improve.