PFC Halts Zero-Coupon Bond Issuance Amidst Low Investor Interest

Power Finance Corporation (PFC) has withdrawn its planned zero-coupon bond (ZCB) issuance for the second time in just over a month, after bids came in at yields higher than the issuer was willing to accept, as per news reports.

Issue Structure and Bidding 

PFC had aimed to raise up to ₹2,000 crore, including a base issue of ₹500 crore and a green shoe option of ₹1,500 crore. The company received 28 bids totalling ₹1,470 crore. The yield expectations from investors ranged between 6.20% and 7.02%. As the bids did not match the issuer’s preferred cut-off, the issue was called off.

Second Withdrawal Since April

On April 30, 2025, PFC had previously cancelled a ₹6,000 crore zero-coupon bond issue due to subdued demand and oversupply in the bond market. At that time, the lack of investor appetite led to unattractive pricing, prompting the company to shelve the plan.

Market Comparison

In September 2024, REC successfully raised ₹5,000 crore via zero-coupon bonds at a 6.25% yield per annum. That issue was significantly oversubscribed, attracting bids nearly seven times the issue size. However, reports suggest that recent market movements have reversed that momentum.

Shift in Yield Curve

Since April 2025, the bond market has seen a downward shift in benchmark yields. This is attributed to the RBI’s monetary easing, including rate cuts and CRR reductions, along with surplus liquidity. As a result, previously issued long-term ZCBs are now trading at wider yields. Investors and arrangers holding these bonds are facing mark-to-market losses and limited exit options due to low trading volumes.

Other Fundraising by PFC

Despite the withdrawn ZCB issue, PFC raised ₹4,480 crore through 2 conventional bond phases, ₹2,500 crore at a 6.27% yield for 2 years and ₹1,980 crore at 6.59% for 5 years.

Read more: PFC Q4 FY25 Earnings Results: Reports 10.6% Rise in Q4 Net Profit to ₹8,358 Crore!

PFC Share Price Performance 

As of 10:39 am on June 10, 2025, Power Finance Corporation share price stood at ₹430.80, a 0.05% decline, with a decline of 16.70% over the past 6 months and 11.32% over the past year.

Conclusion

Investor demand for long-term ZCBs has weakened, with shifting yield expectations affecting pricing and participation across recent issuances.

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