Power Finance Corporation (PFC) will hit the market on January 18 with a ₹4,500-crore non-convertible debenture (NCD) issue for retail investors.

This will be the first tranche of the ₹10,000 crore worth NCD issuance that PFC plans to make this quarter and for which a draft shelf prospectus has already been filed with regulatory authorities, sources close to the developments said.

The fund mobilised is likely to be used for lending to the power sector besides fulfilling some of the obligations cast on PFC under the recently announced Atmanirbhar stimulus package, it is learnt.

Indications are that a separate prospectus for the first tranche will be filed with the Registrar of Companies next Monday. Each NCD will have a face value of ₹1,000 and the coupons offered on them are going to be higher (likely to go up to 7.5 per cent) than the fixed deposit rates offered by banks. The tenor of the bonds could be varying, up to 10 years.

Thanks to the huge monetary stimulus unleashed by the RBI and other central banks around the world, there is gush of liquidity in the Indian financial system, bringing down the deposit rates offered by banks. For instance, a three-year term deposit of SBI offers 5.3 per cent annual interest, which is the lowest since September 2004.

Taxable instrument

Unlike in the past, when PFC offered tax-free bonds to individual investors, the latest NCD issue will be taxable, sources said. This may temper down the net yield that investors could look for in the NCDs, which have been rated 'AAA'.

Based on the response to the first tranche, the next could be rolled out within a fortnight, sources said. In all, PFC wants to complete the mop-up in three tranches and there is also a greenshoe option available to the state-owned infrastructure lender.

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