NCD a good bet for retail investors: Power Finance CMD

The forthcoming maiden public issue of non-convertible debentures (NCDs) of Power Finance Corporation ( PFC) is a good bet for retail investors, who will now get an alternative investment avenue with better yield and varied tenors, its Chairman & Managing Director, Ravinder Singh Dhillon said on Thursday.

PFC’s first tranche of NCDs 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. It may be recalled that PFC had already filed a shelf prospectus with a limit of up to ₹10,000 crore. As much as 80 per cent of the NCD issue is being allocated for retail and high net worth individual investors.

Addressing a virtual press conference to announce the launch of the NCD issue, Dhillon said this offering stands out as retail investors— who currently have very few attractive investment avenues — can avail interest rates as high as 7.15 per cent ( for 15 year tenor NCD) even during the current low interest rate environment. He highlighted that Interest rates on available options such as fixed deposits or small savings schemes are relatively low in the current market scenario.

“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. This maiden NCD issue is a step towards further diversification of source of funds and intended to tap wider retail taxable bond segment. It will open a new chapter in PFC’s history through further diversification and offer us a significant opportunity”, Dhillon said. PFC is the country’s largest infrastructure financing company dedicated to the power sector.

Parminder Chopra Director (finance), PFC said thatcher NCDs are taxable, secured, and will be listed on Bombay Stock Exchange. “All the banks offering rates from 4.5-6 per cent across tenors (up to ten years). NSCs are offering 5.8 per cent. Considering these rates, the returns offered under PFC are better than other options”, she said.

Each NCD has a face value of ₹ 1,000 each and Tranche I offers options for tenures of 3,5,10 and 15 years. The minimum application is for ten NCDs. The coupon rates range from 4.65 per cent to 7.15 per cent depending on the tenor and the category of investor making the purchase.

Asked if PFC will look to exhaust the entire ₹ 10,000 crore shelf limit this fiscal itself, Dhillon said it would depend on the market appetite and investor response to the Tranche I.