PFC NCD issue: Government company giving long term huge earning opportunity, read all information including subscription

Mumbai. State-run Power Finance Corporation (PFC) Limited is offering non-convertible debentures (NCDs) today i.e. from 15 January. For short term and medium term, this company is offering these NCDs at a low rate. This is almost the same as the current rate on fixed deposits by public sector banks. But, interest rates are better for the long term. PFC is also offering floating rate option to 10-year NCDs. For this, the base issue size has been fixed at Rs 500 crore, but can retain subscriptions up to Rs 4,500 crore. In this way it can reach around Rs 5,000 crore.

This NCD of PFC will be available in demat format and investors can pay through UPI. The face value of each NCD will be Rs 1,000 and a minimum investment of Rs 10,000 can be made. The deadline for the issue is 29 January. However, depending on the response, it may be closed earlier. Let us know whether investing in this NCD of PFC will be beneficial or not and what are the other options?

Lower rate for retail investors in the short term
For retail investors, the coupon rates for the three and five year period are 4.8 per cent and 5.8 per cent respectively. State Bank of India is paying 5.3 percent interest on FDs of less than 3 years to 5 years. Whereas, the rate of interest on FDs of 5-10 years is 5.4 per cent. Investors investing Rs 2 lakh or less in this type of issue fall under the category of retail investors.Also read: Market cap of BSE listed companies exceeds GDP of country, for the first time in a decade

Long term may be a better option if you want fixed income

In the long term, PFC is offering better interest rate. It also has the option of receiving payouts on a quarterly basis. Investors will get a payout only once a year for a period of 3 and 5 years. Experts say that based on the interest rate outlook, it should be decided whether to invest in it or not. There will be a phase of low interest rate for some time to come. In such a situation, it can become a good option for those looking for fixed income instruments.

>> If you opt for quarterly payout over a period of 10 years, the interest rate will be 6.82 per cent. However, it is 7 per cent for the annual option.

>> There will also be an option to choose a floating rate, where the interest rate will keep changing every year. This rate will be based on 10-year government securities.

>> The interest rate will be 6.97 percent for an investment period of 15 years. This quarter is for payout. This interest rate will be 7.15 per cent for the annual payout.

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What are the other options?

1. There are very few options regarding the fixed income of retail investors, who are paying interest between 6.82 per cent and 7.15 per cent. A safe option for investors is PFC NCD’s Floating Rate NCD Bonds, 2020. At present, the government is paying 7.15 percent interest on it. However, this interest rate can change every six months.

2. Under the Post Office Small Savings Scheme, short term and medium term fixed deposits are getting better interest. This rate is 5.5 percent on three-year deposits and 6.7 percent on 5-year deposits.