Power Finance Corporation withdrew a planned three-year bond issue amid rising yields and investor demand for higher premiums, highlighting escalating funding costs in India’s corporate debt sector yet successfully raising ₹2,500 crore through a 15-year bond. Market caution persists with other issuers planning fundraising amidst volatile government bond yields.
Power Finance Corporation withdrew a planned three-year bond sale on Monday after investors demanded yields above its target, underscoring how quickly funding costs have risen in India’s corporate debt market. The state-owned lender still raised ₹2,500 crore through a 15-year bond at a cut-off coupon of 7.55 per cent.
According to Business Standard, PFC had sought ₹2,500 crore each through the short-dated and long-dated securities, but the shorter tenor failed to clear at acceptable levels. The 15-year tranche drew bids worth ₹6,995 crore across 93 offers, with most demand clustered around 7.53 per cent and 7.54 per cent, showing that investors were willing to commit funds only at a premium.
The move comes against a backdrop of firmer government bond yields, especially at the shorter end of the curve. Traders have pointed to caution after the Reserve Bank of India ended its FCNR(B) swap window earlier than expected, a step that has unsettled sentiment and prompted investors to ask for wider spreads over sovereign debt. Business Standard has also reported that foreign banks had been active buyers of three- to five-year government securities under the concessional swap window, helping earlier to soften yields before that support began to unwind.
The pressure is not limited to PFC. REC plans to raise as much as ₹6,000 crore on Thursday through two series of non-convertible debentures, one maturing in just over two years and the other in a little more than 10 years. Both tranches carry AAA ratings with stable outlooks from multiple credit assessors, but the reception to PFC’s latest offer suggests that even highly rated issuers are facing a tougher market as borrowing costs climb.
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