Power Finance Aims To Raise ₹10,000 Cr Via Public Bonds As Bank Lending Slows

(MENAFN- Live Mint)

Mumbai: Power Finance Corporation (PFC) plans to raise up to ₹10,000 crore by selling multi-tranche public bonds, two people aware of the matter said, as it aims to diversify funding amid slowing bank credit and boost lending to infrastructure projects.

This would mark PFC's third outing in the public bond market in over four years. The lender previously tapped the public market in July 2023, raising ₹2,824 crore, and ₹4,428.99 crore in January 2021, according to data from the Securities and Exchange Board of India (Sebi).

The state-run non-banking financial company (NBFC) has already reached out to some merchant bankers to gauge their interest in the fundraise, said the people cited earlier, requesting not to be identified. It has also invited applications from intermediaries, including lead managers, legal advisors, and registrars, showed a document seen by Mint.

Also Read | Corporate funding slows as firms turn from bank loans to bonds, equit

PFC has not yet finalized the coupon rate or the tenor of the upcoming bond issuances, but the process of appointing intermediaries is underway, said the first person.

The 10-year government security yield rose by 20 basis points in August, before easing slightly to 6.49% on 12 September, 13 basis points higher than at the start of August. Bond yields and prices move in opposite directions.

“PFC has been looking to diversify its pool of resources and reach retail investors, and public issues are the right option," said Ajay Manglunia, executive director at Capri Global Capital Ltd.“Their experience with public issues has been good, they have received strong subscriptions and were always able to close early."

Manglunia said PFC has conducted public bond issues twice in the past, besides raising funds via tax-free papers in the past decade. He added that the issuance may take a couple of months to materialize as the company finalises intermediaries.

“Their bond issue may probably hit the market either in Q3 or Q4, which is the most appropriate time. People have been looking to participate in top credit quality, and PFC, with its strong financials and leadership in power sector financing, is among the best credits," Manglunia said.

Also Read | Defiance in Tianjin: India rejects US pressure with China-Russia bond

The success of PFC in upcoming public bond issuances may drive others to take the same route for fundraise, he said. Under private placements, the issuer sells bonds to a select group of institutional investors like mutual funds, and insurance companies, as well as high net worth individuals.

Queries emailed to PFC remained unanswered till press time.

Mint reported in July that NBFCs are increasingly relying on bond markets amid heavier funding requirements and regulatory nudges to diversify lending pools.

Slowing bank funding

Bank funding to NBFCs has slowed over the past 2-3 years due to the Reserve Bank of India's (RBI) caution over systemic interconnectedness and higher risk weights on NBFC exposures, though some of these measures were later reversed.

Outstanding bank loans to NBFCs stood at ₹15.7 trillion as of July-end, up 2.6% from the same period last year. However, between March-end and July-end, the total bank loans to the sector shrunk 4.1%, data from the RBI showed.

In FY25, companies raised ₹9.95 trillion through bonds, of which public debt sales amounted to ₹8,149 crore across 43 issuances, Sebi data showed. In the current financial year, as of July, public bond issuances stood at ₹4,086.30 crore. Total bond issuances-including private placements-stood at around ₹3.54 trillion as of July.

Public bond issues, while more compliance-heavy and costlier than private placements, provide wider investor access, better price discovery and liquidity through exchange listing. These instruments also offer higher rates compared with private placements to attract retail investors, particularly in a falling interest rate environment.

Rating agency Icra, which has a consolidated view of PFC and its subsidiary REC Ltd, reaffirmed the group's ratings, citing sovereign ownership, its strategic role in implementing power sector schemes, and a dominant ₹10.7 trillion loan book as of December 2024, according to its report dated March 26.

The rating agency noted that asset quality has improved, with gross stage-3 assets, or bad loans, down to 2.3% at the consolidated level, while profitability remains healthy. However, it flagged risks from sectoral concentration and moderate capitalization.

Also Read | Yield signal: India's market for bonds has a mind of its ow

As of 30 June, PFC's outstanding borrowings stood at ₹4.6 trillion, of which domestic bonds accounted for ₹2.64 trillion, or 57%, according to the company's Q1 FY26 investor presentation. Nearly a fifth is from rupee term loans taken from banks and other financial institutions.

PFC reported a net profit of ₹4,501.5 crore for the quarter ended 30 June, down 11.9% from the previous quarter, but up 21.1% from ₹3,717.9 crore a year earlier, according to the company's financial statement.

Between 1 and 29 August, PFC shares declined 6%, compared with a 0.6% drop in the Nifty, according to data from Bloomberg. In September so far (till 12 September), the stock has rebounded 4.2%, against a 2.8% gain in the benchmark index. The stock ended 0.9% lower at ₹396 on NSE on Friday.

MENAFN12092025007365015876ID1110055742