The five-year bond was priced at 105 basis points above the five-year US treasury with was tighter than the initial price guidance of 130 basis points above the same US security. With the five-year US bond trading at 4.27%, the final yield on the bond was priced at 5.32%.
“The company could garner an order book of close to $1 billion from investors in Asia, the Middle East and some from Europe. But investors are also seeking higher yields because they know that there is a lot of supply of bonds lined up from India, and they can demand a higher price,” said a person familiar with the issue.
Power Finance Corp successfully raised $300 million in international bonds, marking India’s second such issuance since the RBI’s special swap arrangement. The five-year bond was priced at 105 basis points above US treasuries, attracting a substantial order book. This move capitalizes on the RBI’s 1.5% fixed-rate swap for external borrowings, with other major Indian banks also planning similar issuances.
This is the second bond from India since the RBI’s concessional swap window opened. PFC had to pay a higher spread than HDFC Bank. Last week, HDFC Bank raised $750 million by selling five-year bonds to overseas investors through the GIFT City IFSC Banking Unit. The bond was the bank’s first overseas issue since February 2024 and was priced at 90 basis points above the five-year US treasury, the tightest spread over the US benchmark for any private sector bank in India.
PFC did not reply to an email seeking comment. Spokespersons for MUFG and Barclays declined to comment, while a Standard Chartered spokesperson did not reply to an email seeking comment.
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PFC could be the first in a busy overseas bond raising week for Indian financial institutions as they step up to take advantage of the 1.5% fixed rate swap provided by the RBI for raising external commercial borrowings (ECBs). Besides PFC, State Bank of India (SBI), Bank of Baroda (BoB) and Axis Bank have lined up dollar bond issues this week, ET reported in its June 20 edition.
The RBI announced a special swap arrangement earlier this month in a bid to attract dollars into the country. The swap is open for both banks as well as public sector enterprises. Under the arrangement, a bank can sell dollars to the RBI and simultaneously agree to buy back the dollars at the end of the tenure of the loan at a fixed rate of 1.5% per annum compounded semi-annually, removing the need for them to hedge their future dollar liabilities, which were costing up to 4% when the swap was announced.