Retail investors and high net-worth individuals (HNIs) demand for Power Finance Corporation Ltd’s (PFC) tax-free bonds issued helped the company leading to mobilise Rs 641.04 crore till Monday.

The fomer had put in Rs 376.67 crore, while HNIs subscribed for Rs 112.83 crore till Monday. The issue opened on December 21 and has been extended to close on December 27.

Qualified institutional bidders have placed bids for Rs 70.49 crore and corporates for Rs 81.05 crore. The issue is spread across 25 per cent for qualified institutional bidders; 15 per cent for corporates; 20 per cent for HNIs; and up to 40 per cent for retail customers.

According to industry watchers, corporates are not keen on these bonds, because Section 372A of the Companies Act, 1956 does not encourage them to subscribe to these bonds.

“The clause was overlooked while deciding the coupon rate, because the Government always wanted tax-free bonds to target retail customers,” said an investment banker, requesting anonymity. Demand for the bond has also been reduced as it has come at the heels of other issues such as REC’s tax-free bonds and Bharti Infratel’s and CARE Ratings’ initial public offerings. Moreover, the coupon rate offered by PFC is 0.2-0.3 per cent lower than the REC offer, the banker added.

For retail investors, the issue offers a coupon rate of 7.69 per cent a year for the 10-year bond and 7.86 per cent for the 15-year bond.

For all other categories of customers, the coupon rate is 7.19 per cent a year for 10 years and 7.36 per cent for 15 years. PFC targeted to mop up to Rs 1,000 crore with a green-shoe option up to Rs 4,590 crore.

>siddhartha.s@thehindu.co.in

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