BackPower Finance to raise $500 mn via overseas bonds sales
Financier to decide on pricing next week; coupon rate may be 3.5%; funds to be used to lend to power projects
Premium(Pradeep Gaur/Mint)
Mumbai: State-run infrastructure financier Power Finance Corp. Ltd (PFC) plans to raise $500 million (about ₹ 2,730 crore) by selling overseas bonds this month and use the proceeds to fund electricity projects.
PFC will raise funds by selling five-year bonds. “We conducted the roadshows in November and will be deciding on the pricing of the bonds by next week," said Satnam Singh, chairman and managing of PFC. The roadshows were conducted in Hong Kong, London and Singapore.
Low interest rates are encouraging Indian banks and firms to raise funds overseas. In 2013, EXIM Bank Ltd and Power Grid Corp. of India Ltd raised $750million and $500 million, respectively, by selling 10-year bonds at interest rates close to 4%. Last week, ICICI Bank Ltd raised Singapore $225 million.
Investment bankers say the coupon rate for PFC bonds could be 3.5%. The funds raised will be used to lend money to power projects across the country.
Manmohan Singh, managing director and head of debt capital markets for India at Royal Bank of Scotland NV, or RBS, said the beginning of the year is a good time for firms to venture overseas to raise money.
“At the start of the year, investors are looking for good companies or issues for investment. A new year also brings in fresh geographic and sector allocations, which at the moment, is indicating greater demand for strong Indian paper," Singh said.
RBS was one of the managers for Power Grid’s first international bond sale, which was oversubscribed 19 times.
Also, liquidity in the global market has helped companies with reasonable credit ratings to raise funds at cheap rates.
“The global liquidity scenario is benign as most global central banks are infusing money into their economies which, obviously, does not remain restricted to their economies," said Nirav Dalal, managing director, debt capital markets, Yes Bank Ltd.
Standard & Poor’s has assigned PFC an international rating of “BBB-" (also India’s sovereign rating), the highest possible international rating for any Indian firm. BBB- indicates the lowest investment grade rating, and a downgrade would result in the rating slipping to junk status.
Currently, the coupon rate for a five-year bond of an “AAA" rated firm is around 8.98%, according to Bloomberg data, whereas firms are able to raise funds overseas for a tenor of 10-years at rates close to 3.65%-4%.
The bonds sold by PFC will be under the RegS format, which means they are sold to investors outside the US. RegS bonds can be issued in US dollar as well as the Swiss franc, Singapore dollar and Japanese yen.
This fiscal, PFC has raised ₹ 25,000 crore. The infrastructure financier has already tied up a three-year syndicated loan worth $500 million. “We will avail the loan facility and shall withdraw $250 million in first week of February for onward lending," said Satnam Singh. PFC has tied up with ANZ-Grindlays Bank Ltd for the loan facility.
In 2012, PFC had announced it will set up a $1 billion private equity fund in partnership with Tata Capital Ltd to give equity support to various power projects in India. “The agreement with Tata Capital is likely to be signed by first week of March. We are in the final leg of the process," said Satnam Singh.
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