It is rare for public sector companies to be tapping retail investors and high net worth individuals (HNIs), along with regular institutional players for their non-convertible debentures (NCDs) offering.
Power Finance Corporation (PFC), a Maharatna, is raising up to ₹5,000 crore (base issue of ₹500 crore, with a green-shoe option of a further ₹4,500 crore) via NCDs and 40 per cent each (totalling to 80 per cent) of the total allocation is for retail investors and HNIs.
The lender to the power sector is one of the largest non-banking financial companies (NBFCs) and is a systematically-important institution. The issue is rated AAA (stable) by CRISIL, Care and ICRA, denoting the highest safety in terms of servicing interest and timely repayment of principal.
In terms of the current interest rates scenario – after a 125-basis points reduction in 2025 – we may well be at the fag end of the cycle, with at best a minor cut expected for the foreseeable future or possibly none at all.
As deposit rates fall, coupons on NCDs, too, may not be as attractive as they were a year or two earlier.
Read on to know whether the PFC NCD issue can be considered by retail investors as a rewarding avenue.
Coupons and yields
The regular PFC debentures issue has three tenors – five years, 10 years and 15 years. In the five- and 10-year tenors have only annual interest payout options. The 15-year tenor comes with an annual interest payout as well as a cumulative option.
There is also a zero-coupon NCD on offer (one that carries no interest, but pays out a higher sum than the principal at the end of the investment period) for a tenor of 10 years and one month. We ignore this option, more so as the yield is modest – 6.96 per cent for retail investors and 6.85 per cent for HNIs. The 15-year tenor is also not discussed as it represents too long a period to lock into, given the moderate yields on offer.
In the annual payout options, the five-year tenor offers 7 per cent coupon, while the 10-year choice gives 7.2 per cent interest – yields are also the same here.
The five-year and 10-year G-Secs currently trade at yield of 6.43 per cent and 6.65 per cent, respectively (January 14).
This implies a spread of 57 basis points for the five-year tenor and 55 basis points for the 10-year PFC NCD over the similar G-Sec tenor yields.
While the yields appear to have reasonable spreads, the corporate bond market data needs a closer look.
Data from Kotak MF (sourced from Refinitiv) as on January 14 indicates that five-year AAA-rated corporate bonds trade (at an average yield of 7.16 per cent) with a spread of 73 basis points over five-year G-Secs.
The 10-year AAA-rated corporate bonds trade (at an average yield of 7.39 per cent) with a spread of 74 basis points over the 10-year G-Secs.
The PFC issue offers moderate coupons and yields compared to the options available in the bond markets.
In all the options discussed, the yields/coupons are 10 basis points lower for HNIs compared to retail investors.
For fixed income investors, the five-year NSC with 7.7 per cent interest and cumulative payout and the seven-year RBI Taxable Bonds with 8.05 per cent interest (semi-annual payouts) offer better options.
The PFC NCD issue is suitable only for those investors wanting assured, even if moderate, payouts for longer tenors (to act like an immediate annuity after retirement, for instance). Such investors can consider exploring the five-year or 10-year option. This must preferably be done after exploring better yielding alternatives.
Solid financials
PFC provides loans to players across the power sector value chain – generation, transmission and distribution. Fund-based assistance includes term loans, short-term loans, liquidity infusion etc. Non-fund based assistance includes acting as a partner to the government of India’s schemes in the power sector and providing consultancy services.
Apart from the power sector, PFC also provides financial assistance to the infrastructure segment. Charging infrastructure, airports, ports, biofuels, data centres and metros are some examples.
Total loan assets as of September 30, 2025 stood at about ₹5.61 lakh crore. Generation at 46 per cent and distribution at 40 per cent of the loan assets were the main segments.
Government clients account for 76 per cent of the loan assets, while 24 per cent came from private sector customers.
PFC’s borrowings come mainly from domestic bonds (55 per cent), rupee term loans from banks/financial institutions (20 per cent) and foreign currency borrowings (19 per cent).
As of H1FY26, PFC had a net worth of ₹97,525 crore, up from ₹79,204 crore in FY24.
Gross NPAs have fallen steadily from 5.61 per cent in FY22 to 1.87 per cent in H1FY26.
Net NPAs have declined from 1.76 per cent in FY22 to 0.37 per cent in H1FY26.
Overall, PFC enjoys fairly robust financials with healthy prospects, as the government intensifies focus on the power sector, especially on the renewable energy side.
Published on January 17, 2026
