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Business Standard
2 days ago
- Business
- Business Standard
PFC, REC shares rally up to 6% on RBI relief for project financiers
Shares of India's project financiers rallied on Friday after the Reserve Bank of India (RBI) lowered provisioning to 1 per cent during construction and exempted existing projects from higher requirements. Shares of Power Finance Corp rose as much as 5.66 per cent at ₹412.4, the steepest gains since April 15 this year. It pared gains to trade 5.4 per cent higher at ₹411, compared to a 0.9 per cent rise in the benchmark Nifty50, as of 10:37 AM. During the session, the counters of REC and Indian Railway Finance Corp surged as much as 6 per cent and 2.3 per cent, respectively. It later trimmed gains to trade 4 per cent and 2 per cent higher. The Bank Nifty also traded higher, gaining as much as 0.69 per cent during the day. Track LIVE Stock Market Updates Here RBI relief for project finance The RBI mandated a general provision of only 1 per cent of funded outstanding during the construction phase for all projects except for commercial real estate (CRE), as compared to 5 per cent proposed in the draft norms released in May last year. This provisioning would come into effect from October 1, 2025, the RBI said on Thursday. For CRE, the general provision requirement would be 1.25 per cent in the construction phase, while it would be 1 per cent for CRE-Residential Housing (RH). During the operational phase, the standard asset provisioning requirement will reduce to 1 per cent for CRE, 0.75 per cent for CRE-RH, and 0.4 per cent for other project exposures. At present, standard asset provisioning for all projects except CRE is 0.4 per cent. For CRE, it is 1 per cent. Further, the RBI also clarified that the increased provisioning requirement was not applicable for existing projects. The draft norms proposed higher provisions for existing projects, too. Motilal Oswal on RBI's project financing norms The new guidelines simplify and standardise the treatment of project loans across sectors, the brokerage said in a note. While the 2024 draft norms had proposed stringent provisioning and upgrade rules, the final guidelines "significantly" relax these provisions, resulting in minimal impact on banks' profitability and balance sheets. The brokerage believes that revised norms will have a negligible impact on bank and NBFC profitability. For new project loans, any additional provisioning costs are likely to be passed on to borrowers through yield adjustments. Top picks for the brokerage include: ICICI Bank, HDFC Bank, State Bank of India, AU Small Finance Bank, and Federal Bank. Emkay on project financing norms The RBI's latest financing norms represent a major shift from the stringent draft, and offer a lower, risk-based provisioning, harmonised rules, and greater flexibility for lenders, the brokerage said. The sharper reduction in standard asset provisioning during the construction phase is a huge respite for project financiers, it said. The impact of these guidelines will be visible only from FY27, it said, adding that there will likely be no impact on profit or networth, though the regulatory capital (Tier I) will be reduced by this minor impairment reserve. REC and PFC shares have materially underperformed since the second half of the financial year 2024-25 (FY25), largely due to a de-rating driven by moderation in assets under management (AUM) growth, the brokerage said. "While near-term growth concerns persist, the medium- to long-term outlook for the power sector, both conventional and renewable, remains strong."
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Business Standard
13-06-2025
- Business
- Business Standard
Nabard gets approval to raise ₹19.5K cr via deep-discount zero-coupon bonds
India's National Bank for Agriculture and Rural Development (Nabard) has obtained federal government approval to raise up to Rs 19,500 crore ($2.3 billion) through deep-discount bonds. Nabard can raise funds via these deep-discount zero-coupon bonds, which mature in 10 years, 11 months, and 13 days, until the end of March 2027, a government document showed on Friday. Deep-discount bonds are typically issued at a discount of over 20-25 per cent to their face value and do not pay regular interest, similar to zero-coupon notes. This feature eliminates reinvestment risks, as the bonds are redeemed at face value at maturity. Since March, this is the fifth time the government has approved a state-run firm to issue deep-discount debt, and is the largest amount approved so far. Earlier this month, state-run REC also received a government nod to issue these bonds. In March, Power Finance Corp was allowed to issue Rs 10,000 crore of such debt, followed by Housing and Urban Development Corp in April, and Indian Railway Finance Corp was given the go-ahead in May . All these firms must complete their fundraising by the end of March 2027. While the state-run firms have been rushing to seek approval for this rare corporate structure, these issues have not seen sufficient demand from investors. "Zero-Coupon Bonds have hit a rough patch lately, with the last issue was pulled back due to muted investor appetite and upward pressure on yield expectations. But this near-term hiccup doesn't alter the structural appeal of ZCBs particularly in a softening rate cycle," said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap. "If priced right by the investors in the primary market, ZCBs can be attractive, aiming to lock in duration without worrying about reinvestment risk. Plus, the deep discount structure offers potential tax efficiency under current capital gains norms, making them worth a closer look despite current bid-ask mismatches," Srinivasan added. Weak investor demand led to the withdrawal of two recent issues, including Power Finance Corp's planned deep-discount debt issue on June 9. The state-owned company received bids worth just Rs 14,700 crore ($171.91 million), against its target of Rs 2000 crore, which had a base issue size of Rs 500 crores.
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Business Standard
11-06-2025
- Business
- Business Standard
Two public-sector firms pull bond sales as RBI moves spark swings
The average yield on top-rated three- and five-year corporate debt rose eight basis points and nine basis points Bloomberg Two state-run Indian companies scrapped plans to issue rupee-denominated bonds amid yield volatility triggered by the Reserve Bank of India's surprise policy moves. Refiner Indian Oil Corp. on Wednesday withdrew plans to sell as much as Rs 30 billion ($351 million) of five-year notes despite strong demand, while Power Finance Corp. on Monday canceled a Rs 20-billion sale of bonds due in July 2035. The average yield on top-rated three- and five-year corporate debt rose eight basis points and nine basis points, respectively, this week after dropping 4-5 basis points after the central bank's liquidity boost on Friday. 'Pulling of bond sales signals that initial market euphoria is giving way for a more cautious reassessment,' said Venkatakrishnan Srinivasan, managing partner at financial advisory firm Rockfort Fincap. 'Such issuers may wait for yields to settle down before raising money.' The RBI on Friday delivered a bigger-than-expected rate cut and injected further liquidity, spurring a rally in shorter-tenor bond. However, a simultaneous shift to a neutral stance set a higher bar for future easing, tempering enthusiasm for longer-dated debt.
Bloomberg
11-06-2025
- Business
- Bloomberg
Two Indian State Firms Pull Bond Sales as RBI Moves Spark Swings
Two state-run Indian companies scrapped plans to issue rupee-denominated bonds amid yield volatility triggered by the Reserve Bank of India's surprise policy moves. Refiner Indian Oil Corp. on Wednesday withdrew plans to sell as much as 30 billion rupees ($351 million) of five-year notes despite strong demand, while Power Finance Corp. on Monday canceled a 20-billion rupee sale of bonds due in July 2035.
Time of India
11-06-2025
- Business
- Time of India
Indian companies may double capex to $850 billion in next five years
MUMBAI: India's corporate sector is gearing up for its largest capital expenditure cycle in over a decade, with companies poised to nearly double their investments over the next five years, according to S&P Global Ratings. The rating agency estimates total capex could reach $800 billion to $850 billion, mostly funded through operating cash flows and supported by domestic financing channels. If execution remains on track and macroeconomic conditions hold steady, S&P expects companies to expand without significantly increasing debt. Infrastructure will drive the surge, led by power, roads, and transport, where spending is expected to double. Industrial capex could rise 40%-50%. Aviation and renewables are projected to account for about 15% of total spending and around 40% of the incremental investment. Renewable capacity targets range from 200 GW to 500 GW, while power transmission could require $100 billion in capex. Aviation is scaling rapidly. Indian carriers have ordered more than 1,600 aircraft through 2030, and the number of airports is projected to rise to 220 from below 150. S&P noted that investments in airports may double or triple. Public lenders like Power Finance Corp, REC, and IREDA are expected to play a key role. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
