Power Finance Corporation (PFC) NCDs Bonds – Jan-2021 – Review
Power Finance Corporation is coming up secured NCDs that would open for subscription on January 15, 2020. The interest rates are as high as 7.15%. It offers NCDs for 3 years, 5 years, 10 years and 15 years tenure. Currently banks are offering low interest rates of 4% to 5.5% and investors might be looking for high interest rate fixed income options. Should you invest in Power Finance Corporation NCD Bonds of January, 2021 Tranche I issue? What are the risk factors one should consider before investing in PFC upcoming NCD?. Let me do PFC NCD review in this article.
About Power Finance Corporation Limited
Power Finance Corporation is a public sector company and specialised financial institution in power sector. With 20% market share, it is designated as nodal agency for development of Integrated power development scheme, ultra mega power projects etc.,
Power Finance Corporation NCD Jan-2021 –Tranche I – Issue details
Power Finance Corporation is issuing secured redeemable Non Convertible Debentures (NCD’s) in the January Tranche-I issue to the tune of Rs 500 Crores, with an option to retain another Rs 4,500 Crores towards over subscription, totaling to Rs 5,000 Crores. It comes with 7 different options with 3 years, 5 years, 10 years and 15 years tenure.
About PFC NCD 2021 details (Tranche-I issue)
They are offering secured NCDs in this issue.
In secured NCDs, the principal and interest would be secured by way of first pari passu charge through hypothecation of the book debts / receivables.
Features of Power Finance Corporation NCD bonds of Jan-2021
NCD Issue start date: 15-January-2021
NCD Issue closes on: 29-January-2021
NCD’s are available in 7 different options.
The interest on these NCDs are payable annually or quarterly depending on the NCD option chosen.
The face value of the NCD bond is Rs 1,000.
Minimum investment is for 10 bonds means, you need to invest for a minimum of Rs 10,000. Beyond this you can invest in multiples of 1 bond.
These NCD bonds would be listed on BSE. Hence, these are liquid investments.
Non-resident Indians (NRI’s) cannot invest in these NCD’s.
CARE/Crisil/ICRA have rated these NCDs as AAA: Stable, which indicates that instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations and carry a low credit risk.
Trust Investment Advisor, AK Capital Services and Edelweiss Financial Services are the lead manager for this issue.
Power Finance Corporation NCD Interest Rates
How is the company doing in terms of Financials?
Here is the financial performance based on consolidated numbers.
1) Its revenues have increased from Rs 27,780 Crores in FY2016 to Rs 62,189 Crores in FY2020.
2) Its profits have increased from Rs 6,184 Crores in FY2016 to Rs 9,455 Crores in FY2020. However, FY2020 profits have declined compared to FY2019.
Why to invest?
1) This is a leading public sector power finance company in India.
2) Attractive interest rates where one can get upto 7.15% interest.
3) It is issuing secured NCD which are safe compared to other unsecured NCDs.
4) PFC NCD bonds have good credit rating of AAA from CARE/ICRA/Crisil.
Why not to invest in Power Finance Corporation Jan-2021 NCD?
1) It is issuing NCD bonds of 10 to 15 years, which are the long term. In case there is an increase in interest rates in the near future, investors might regret about it.
2) Short term NCD bonds of 3 years provides low interest rates. Such rates are anyways available with banks, hence investors would not rush to invest in such NCD bonds.
3) You can refer all risk factors in the NCD prospectus.
How to apply these NCDs?
You need to apply these NCDs in demat form. If you have demat account, you can login to your account and go to IPO/NFO/NCD section and apply for the same. You can reach out to any of the lead managers websites to know more details on how to apply them. You can also download Power Finance NCD 2021 applicable form at below link.
When these NCDs would get listed on BSE?
PFC NCD 2021 would get listed after 6 working days from the date of closure.
Should you invest in Power Finance Corporation NCDs Jan-2021 issue?
Here are a few thoughts about such NCDs:
1) Currently banks are providing reduced interest rates which are between 4% to 5.5% per annum. Power Finance Corporation is offering secured NCDs that offers high interest rates up to 7.15%. This would attract investors who are looking to earn higher fixed income.
2) These NCDs are rated as AAA Stable which are considered as a high credit rating. I keep recommending to investors that one should always invest in AAA rated NCDs or fixed deposits which can provide some safety to their investments.
3) Its 3 years NCD provide low interest rates. Investors can invest in 5 years and above tenure NCD bonds to get high interest rates.
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