Power Finance Corporation Withdraws Zero-Coupon Bond Issue Amid Investor Yield Demands

Image Source: NDTV Profit

India’s Power Finance Corporation (PFC) has withdrawn its planned zero-coupon bond issuance after investors sought higher-than-expected yields. The state-owned entity had initially aimed to raise funds through long-term bonds but faced limited interest due to pricing concerns.

Key Highlights

- PFC had planned to issue zero-coupon bonds maturing in June 2035, but investor bids reflected higher yield expectations than anticipated
- The company expected a coupon rate of around 6.30 percent, but bids ranged between 6.50 and 7.01 percent, leading to the withdrawal of the issuance
- A total of 59 bids worth ₹5,763.15 crore were received, but the pricing did not align with PFC’s expectations
- Another bond issuance scheduled for April 2040 was also withdrawn due to similar pricing concerns, with bids ranging between 6.81 and 7.10 percent

Market Dynamics And Investor Sentiment

- The withdrawal comes at a time when bond yields have touched a three-year low, affecting investor interest in long-term securities
- Investors were reluctant to bid at tighter pricing levels, reflecting concerns over future interest rate movements
- The long end of the yield curve has seen reduced demand, with corporate bond yields mirroring sovereign government securities

Industry Perspective

The decision to withdraw the bond issuance highlights the challenges faced by issuers in pricing long-term debt instruments amid fluctuating market conditions. While PFC remains a key player in India’s infrastructure financing, the move underscores the need for strategic adjustments in bond offerings to align with investor expectations.

Sources: NDTV Profit, Economic Times, Business Standard.