About Company

Power Finance Corporation funds

power projects in India. The company
serves state power utilities, central
power sector utilities, power
departments, private power sector
utilities, joint sector power utilities,
power equipment manufacturers,
and municipal power utilities.

Bond features

Bond Issuer: Power Finance Corp Ltd.

Price: 102.613 INR.
Issuing date: 09/04/2015.
Maturity: 09/04/2020.
Coupon rate: 8.36% compounded
annually.
Yield to maturity: 7.438569.
Spread: 48.63 bp.
Z-spread: 102.5.
ISIN no: INE134E08HV7.

Bond rating
Rating:
a) CRIS: AAA
b) ICRA: AAA
c) CARE: AAA
) We will be selecting CRISIL rating for further
analysis and its construction methodology.
) Instruments with AAA rating are considered to
have the highest degree of safety regarding
timely servicing of financial obligations. Such
instruments carry lowest credit risk.

CRISIL AAA rated Bond

Features
1. Base date for the Index: March 31, 2002
2. Index portfolio seeks to represent the performance of AAA
rated liquid bonds
3. Total Return Index seeking to capture coupon and price
returns of the underlying portfolio.
4. Index portfolio marked-to-market on a daily basis using
CRISIL debt valuations.
5. Fully invested with no allocation to cash.

Key Characteristics
Rich history: CRISIL AAA Long Term Bond Index has
an inception date of March 31, 2002. Thus the index
has been in existence for over a decade and seen
multiple interest rate cycles.
Liquidity: The index seeks to capture the
movement of a portfolio comprising liquid AAA rated
corporate bonds, thereby ensuring appropriate
market representation.
Replicability: The index constituents are valued on
a daily basis. This lends the index a realistic
approach by having the valuations close to market
levels.

Methodology:
Top 12 issuers are identified by using a consistent
liquidity score based on the following parameters
analyzed for the previous one quarter: Volume traded:
70% No of days traded: 15% No of trades: 15%.
Rating considered for a bond is the conservative rating
of all the bonds for that particular issuer (except for SO
rated bonds) .
Most liquid bond for each of the shortlisted 12 issuers is
selected.
The weights to the eligible bonds are allocated on the
basis of a combined score of Liquidity of issuer (70%)
Amount outstanding of issuer (30%).

 Weight to each bond is subject to a cap of

15%. Excess weight is redistributed
proportionately among other bonds.
The index constituents are valued on a daily
basis using CRISIL Valuations.
The index is rebalanced on the 1st business
day of every month.
Perpetual bonds, Floating rate bonds, Tax free
bonds and bonds with single option (call/put)
are excluded from the universe of bonds

Z spread
Z-spread is the basis point spread that
would need to be added to the implied
spot yield curve such that the discounted
cash flows of the a bond are equal to its
present value (its current market price).
The main spread of 151.00 bps is the
spread over the government yield curve.
We see that the asset-swap spread(ASW)
is 121.6 bps, while the Z-spread is 118.8
bps.