PFC - Tax Free Bonds HIGHLIGHTS OF TAX BENEFITS In exercise of the powers conferred by item (h) of sub-clause (iv) of clause (15) of Section 10 of the Income Tax Act, 1961 (43 of 1961) the Central Government has authorised Power Finance Corporation Ltd. to issue during the FY 2012-13, tax Free secured redeemable non-Convertible Bonds for the aggregate amount of Rs 5000 crores. Interest from the bond will be exempt from income tax. Since the interest Income on these bonds is exempt, no Tax Deduction at Source is required on the same. Wealth Tax is not levied on investment in Bonds under section 2(ea) of the Wealth-tax Act, 1957. HIGHLIGHTS A Nav-Ratna Government of India undertaking (As of 30th September 2012, 73.72% equity shareholding is held by GOI) A specialised development financial institution, PFC was set up in 1986 to fund projects in the domestic power sector. Classified as Infrastructure Finance Company in July 2010 by RBI & a Public Financial Institution under section 4 A of the Companies Act. Provides a comprehensive range of financial products and related advisory and other services from project conceptualization to the post-commissioning stage for our clients in the power sector, including for generation (conventional and renewable), transmission and distribution projects as well as for related renovation and modernization projects. Expanded its focus areas to include projects that represent forward and backward linkages to the core power sector projects, including procurement of capital equipment for the power sector, fuel sources for power generation projects and related infrastructure development. PFC also intends to fund power trading initiatives. Allied with the Government of India in the implementation of its Accelerated Generation and Supply Program (“AG&SP”) and Accelerated Power Development and Reform Program (“APDRP”) Promoted PTC (India) Ltd. as joint venture along with NTPC and PGCIL Total loan assets increased from Rs. 51,568.31 crores as of March 31, 2008 to Rs. 1,40,819.21 crores as of September 30, 2012. Total income increased from Rs 5,040.04 crores as of March 31, 2008 to Rs 8,136.02 crores as of September 30, 2012, while Profit after tax increased from Rs 1,206.76 crores as of March 31, 2008 to Rs 2,008.37 crores as of September 30, 2012. Capital Adequacy Ratio of 17.69% as of September 30, 2012, against 15.00% norm as specified by RBI for IFCs The Net Interest Margin (NIM) stood at 4.23% for the half year ending September 30, 2012 Gross NPA ratio of 0.97% of total loan assets as on September 30, 2012 Source: Shelf Prospectus Dated December 8, 2012 Disclaimer: “Invest only on the basis of Prospectus” PFC - Tax Free Bonds SALIENT FEATURES OF THE PROPOSED TAX FREE BONDS Tax benefits u/s 10 (15) (iv) (h) of the Income Tax Act, 1961 The Bonds are tax free in nature and the interest on the Bonds will not form part of the total taxable income of Bondholders. Credit Ratings of “CRISIL AAA/Stable” by CRISIL, “[ICRA] AAA” by ICRA. Instruments with these ratings are considered to have the highest degree of safety regarding timely servicing of financial obligations and such instruments carry lowest credit risk Bonds can be held in physical or in dematerialized form, at the option of bondholders but the trading of the Bonds shall be in dematerialized form only Bonds are proposed to be listed on the BSE Strengths Comprehensive financial assistance platform focused on the Indian power sector PFC provides a comprehensive range of financial products and related advisory and other services. It provides various fund-based financial products including long-term project finance, short-term loans, buyer's line of credit and debt refinancing schemes, as well as non-fund based assistance including default payment guarantees and letters of comfort. PFC also provides various fee-based technical advisory and consultancy services for power sector projects. Strategic role in GoI initiatives and established relationships with power sector participants PFC has played a strategic role in the GoI’s initiatives for the promotion and development of the power sector in India for more than two decades. PFC has developed strong relationships with the Central and State governments, various regulatory authorities, significant power sector organizations, Central and State power utilities, private sector project developers, as well as other intermediaries in the power sector. PFC provides value to its clients in various ways, by supporting their operations as well as providing assistance with long-term reform and restructuring programs. This unique positioning enables the company to leverage as a preferred financing provider for the power sector in India. Operational flexibility & Favorable Credit Rating to help in fundraising and lending opportunities PFC’s NBFC and IFC classification enables it to be operationally more flexible and effectively capitalize on available financing opportunities. Its classification as an IFC enables it to increase its lending exposures to individual entities, corporations and groups, compared to other NBFCs that are not IFCs. Further with the highest credit rating ‘[ICRA] AAA’ and ‘CRISIL AAA/ Stable’, the company has access to various cost- competitive sources of funds. Experienced and committed management The management has significant experience in the power sector and the financial services industry, which has enabled it to develop a comprehensive and effective project appraisal process, implement a stringent risk management framework, identify specific requirements of power sector projects and offer comprehensive financing solutions and advisory assistance to such projects. Further the experience of its management has enabled it to successfully identify attractive financing opportunities. Source: Shelf Prospectus Dated December 8, 2012 Disclaimer: “Invest only on the basis of Prospectus” PFC - Tax Free Bonds Issue Structure Issuer Power Finance Corporation Limited Tax free bonds of face value of Rs 1,000 each, in the nature of secured, redeemable, non-convertible debentures, having benefits under section Type of instrument 10(15)(iv)(h) of the Income Tax Act, to be issued in one or more tranches on the terms and conditions as set out in Prospectus Tranche -I Nature of the instrument Secured Seniority Pari passu with other secured creditors Mode of the issue Public issue Interest type Fixed Frequency of interest payment Annual Day count basis Actual/ actual Interest on application money As per the interest rate for the Applicant Category Interest on refund money @ the rate of 5.00 % p.a. for all Category Portions, (except for ASBA Applicants), (subject to deduction of tax at source, as applicable) Tenor / Maturity 10 years and 15 years from the Deemed Date of Allotment Redemption Date 10 years and 15 years from the Deemed Date of Allotment Redemption Amount The principal amount on the Bonds along with interest accrued on them as on the Redemption Date Issue Price (in Rs.) Rs. 1,000 Discount at which security is issued Not applicable and the effective yield as a result of such discount Put /Call Option Not applicable Face value Rs. 1,000 Minimum application size 5 Bonds (Rs. 5,000) across all the Series of Bonds and in multiples of 1 Bond (Rs. 1,000) thereof Market Lot/ Trading Lot One Bond Pay-in date Application Date Credit ratings “ICRA AAA” by ICRA, “CRISIL AAA” by CRISIL Listing BSE Issue size Rs. 1,000 crores Option to retain oversubscription Upto shelf limit of Rs. 4,590 crores Debenture Trustee IL & FS Trust Company Limited Depositaries NSDL and CDSL Registrar MCS Limited Issuance Dematerialised form or physical form* as specified by an Applicant in the Application Form Trading In dematerialised form only Issue opening date February 18,2013 As per issue communication - The Issue shall remain open for subscription from 10:00 a.m. to 5:00 p.m. (Indian Standard Time) for the period indicated above, except that the Issue may close on such earlier date (such early closure being subject to the Category IV Portion being fully subscribed prior to such early closure) or extended date as may be decided by the Board or the a duly constituted committee thereof, subject Issue closing date to necessary approvals. In the event of an early closure or extension of the Issue, our Company shall ensure that notice of the same is provided to the prospective investors through an advertisement in a reputed daily national newspaper on or before such earlier or extended date of Issue closure. The date on which the Board of Directors/or any committee thereof approves the Allotment of the Bonds for each Tranche Issue or such date as may be determined by the Board of Directors/ or any committee thereof and notified to the Designated Stock Exchange. All benefits relating Deemed date of Allotment to the Bonds including interest on Bonds (as specified for this Issue in this Prospectus Tranche Issue-I) shall be available to the Bondholders from the Deemed Date of Allotment A. K. Capital Services Limited, ICICI Securities Limited, Enam Securities Private Limited, Kotak Mahindra Capital Company Limited and Lead Managers SBI Capital Markets Limited *In terms of Regulation 4(2)(d) of the Debt Regulations, our Company will undertake this public issue of the Bonds in dematerialised form. However, in terms of section 8(1) of the Depositories Act,, the Company, at the request of the Investors who wish to hold the Bonds in physical form will fulfill such request. Source: Prospectus Tranche-I dated December 8, 2012 PFC - Tax Free Bonds Bond Particulars Series of Bonds* Options Tranche-I Series 1 Tranche-I Series 2 10 years (120 months) from the Deemed 15 years (180 months) from the Deemed Tenor Date of Allotment.