Power Finance Corp gets govt nod to issue deep-discount long-tenor debt

Mumbai: Power Finance Corp (PFC) has received government approval to raise up to 100 billion rupees ($1.15 billion) through a rarely used corporate bond structure.

PFC can raise these funds with a maturity of 10 years and one month until the end of March 2027 by issuing deep-discount zero-coupon bonds, a government document showed on Tuesday.

Deep-discount bonds are generally issued at a more than 20 per cent-25 per cent discount to their face value and do not pay regular interest, a feature similar to zero-coupon notes that removes reinvestment risks.

Though these bonds are not tax-free, they offer a significant long-term capital gains benefit, which pushes up demand for such notes, while the rarity also attracts investors across segments, according to bankers.

Such bonds are an appealing investment bet for corporate treasuries and high net worth individuals as they do not carry reinvestment risks and provide decent returns, one of the bankers said.

PFC did not reply to a Reuters email seeking comment.

The move comes after REC, another state-run issuer, raised 50 billion rupees through deep-discount zero-coupon bond with a maturity of 10 years and one month in September, at a yield of 6.25 per cent.

Separately, PFC is set to raise up to 80 billion rupees through bonds maturing in 13 months and in three years and four months on Thursday.

The company has also approved a borrowing programme of 1.4 trillion rupees for the financial year that starts in April.

($1 = 87.1920 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sonia Cheema)