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State-run utility Power Finance Corporation (PFC) raised close to Rs 4,000 crore in just a few hours on Thursday through a private placement of debt as institutional investors such as mutual funds and insurance firms, besides traders, lapped up the offering hoping to cash in once the central bank starts cutting rates in the first half of next year as widely anticipated.

According to debt arrangers, the bond offering rated AAA was subscribed to swiftly by mutual funds, insurance companies, the Employees Provident Fund Organisation (EPFO), which runs the largest social security scheme in the country, and also some bond traders.

Power Finance Corporation raised the money by issuing bonds of varying maturities. The three, five and seven-year (taxable) bonds were issued at coupon rates of 9.63%, 9.64% and 9.70% respectively.

"The issue was sold out in a few hours. Mutual funds bought lower maturity bonds, while insurance companies and the EPFO bought longer-tenured papers.

Even traders participated in the bond issue; they expect to make a killing once the RBI starts cutting rates and yields drop," said a leading Mumbai-based merchant banker.

The company will use the proceeds of the issue to provide project term loans, equipment lease financing and short-term loan disbursals for power projects.

PFC CMD Satnam Singh declined to provide details relating to the fund mobilisation on day one but said the issuance attracted good interest from investors.

Source