SUMMER INTERNSHIP

PROJECT REPORT
ON
RESOURCE MOBILISATION: With Reference to
Power Finance Corporation(PFC)

Submitted By
SHIVANI NEGI
BBA-General
Batch: 2019-2022
Trinity Institute of Professional Studies , Dwarka,
New Delhi

Under the supervision of

Mrs. Nimisha Garg
Power Finance Corporation(PFC), Barakhamba
Road, New Delhi
 CERTIFICATE

This is to Certify that Ms. Shivani Negi ,second year student of

Trinity Institute of Professional Studies , Dwarka , enrollment
No. 05120601719 has successfully completed her Summer
internship from 10th July,2021 to 10th August,2021 at Power
Finance Corporation, New Delhi and has submitted this project
report entitled under my supervision.

Mrs. Nimisha Garg

(Power Finance Corporation)
10th August,2021
 ACKNOWLEDGEMENT

It gives me immense pleasure to present this Summer

Internship Project Report on “RESEARCH MOBILISATION”
I am happy to take this opportunity to express my gratitude for
being helpful in completion of my project report.
Firstly, I would like to thank my Respected Mentor Mrs.
Nimisha Garg for her valuable advice and guidance during my
project completion and for always helping me out with all the
issues faced during making of the project report and always
encouraging me.
I would also like to thank Mr.Sanjay Mehrotra for introducing
me to this internship and having faith in me.

Shivani Negi
(BBA GEN.)
TABLE OF CONTENTS
S NO. Particulars Page No.

1. Company Profile 1-5

-Organisational structure
-Mission
-Operations
-PFC subsidiaries ,shareholding pattern
-Borrowings
2. Executive summary 6

3. Resource Mobilization
-Introduction 7-10
-Importance
-Steps
-Funds to be raised ,Pricing of issue

4. Instruments used in capital market 11

5. Libor 12-17
-Uses
-Discontinuation
-Alternatives etc.
6. PFC Performance Highights 18-26
-Structure, shareholder outlook
-Liability mix,Consolidated snapshot etc.
7. Bibliography 27
 COMPANY PROFILE
 Power Corporation Finance (PFC) Ltd. was incorporated on 16th July ,1986.
It is a Schedule-A Navratna CPSE, and is a leading Non-Banking Financial
Corporation in the Country. PFC's registered office is located at New Delhi
and regional offices are located at Mumbai and Chennai.
 PFC is listed on Bombay stock exchange (BSE) and National stock Exchange
(NSE).It is also an ISO 9001:2001 Llisted company and enjoys the status of
Navratna Company in India.
 On 6th December,2018 ,the Government of India approved PFC’s takeover
of Rural Electrification Corporation (REC) Ltd. The acquisition transaction
was completed on 28th March,2019 with PFC paying almost Rs.14,500
Crores to the Govt. of India for the 52.63% stake.

ORGANISATIONAL STRUCTURE
 The company has three wings, (each headed by a Functional Director)
namely, Commercial Division, Projects Division and Finance & Financial
Operations division. The Commercial Division looks after the credit
appraisal and categorization of borrower entities, power sector reforms,
review and analysis. The Projects Division controls the operation in various
states and project appraisal. Finance s Division looks after the Fund
Mobilization and Disbursement.

MISSION
 The Mission of Power Finance Corporation (PFC) is to be the most preferred
Financial Institution, providing affordable and competitive products and
services with efficient and internationally integrated sourcing , partnering
the reforms in the Indian Power Sector and enhancing value to its
stakeholders by promoting efficient investments in the power and allied
sectors in India and abroad.
 It aims to achieve this by being a dynamic, flexible, forward looking,
trustworthy, socially responsible organization, sensitive to their

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 stakeholders' interests, profitable and sustainable at all times, with
transparency and integrity in operations.

OPERATIONS
 Since its inception, PFC has been providing financial assistance to power
projects across India including generation, transmission, distribution and
RM&U projects. Recently, it has forayed into the financing of other
infrastructure projects which have backward linkages to the power sector
like coal mine development, fuel transportation, oil & gas pipelines, etc.
The borrower profile includes State Electricity Boards, State sector power
utilities, Central sector power utilities and Private sector companies.
 PFC is also the nodal agency for the implementation of the ambitious Ultra
Mega Power Plants (UMPPs) and the R-APDRP programme of Govt. of India.
The company also has the mechanism of rating different state Power
Utilities on its performance.

PFC SUBSIDIARIES
 PFC Consulting Ltd.
 Rural Electrification Corporation Ltd.
 PFC green energy Ltd.
 Orissa Integrated Power Ltd.
 Coastal Tamil Nadu Ltd.

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  Bihar Mega Power Ltd.
 Jharkhand Infra Power Ltd.
 Deoghar Mega Power Ltd.
 Chhattisgarh Surguja Power Ltd.
 PFC Capital Advisory Services Ltd.
 Coastal Karnataka Power Ltd.
 Power Equity Capital Advisors Pvt Ltd.
 Sakhigopal Integrated Power Corporation Ltd.
 Tatiya Andra Mega Power Ltd.
 Coastal Maharashtra Mega Power Ltd.
 Ghogarpalli Integrated Power Co. Ltd.

PFC SHAREHOLDING PATTERN

Shareholders
10.80%

9.30%

14.30%
65.90%

Govt. of India Foreign portfolio investers

Insurance/MFs Others

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KEY STRENGTHS
 Largest NBFC by Net-worth (all reserves).
 A specialized Financial Institution in Power Sector.
 A dominant player with around 20% market share.
 A lean and professionally-managed organization.
 Designated as a "Nodal Agency" for development of Integrated Power
Development Scheme(IPDS), Ultra Mega Power Projects (UMPPs) and "Bid
Process Coordinator" for Independent Transmission Projects (ITPs).
 ISO 9001:2015 certified.
 A consistently profit-making and dividend-paying company.
 Strong asset quality reflected in low NPAs.
 Lowest Administrative cost in the industry.
 Consultancy & Advisory services in strategic, financial, regulatory and capacity
building skills under one umbrella.

BORROWINGS
The major part of PFC's funds is raised through Rupee-denominated bonds. They
are rated at par with the Indian Sovereign rating.
It also borrows short term and long term from various banks and other financial
institutions. It has also raised External Commercial Borrowings (ECB) through
private placement in the US market. PFC is one of the institutions eligible for
raising funds through capital gain tax bonds under section 54EC of the Income Tax
Act,1961.
Over the last two-three years, PFC has focused on diversifying its borrowing
portfolio by raising funds from international markets. In November 2017, PFC
launched its main Green Bond issue for US$400 million, which witnessed the
tightest ever spread for any Indian Issuer for its maiden 10-year issue. In the first
quarter of the Financial year 2020, PFC has raised about US$1.3 billion from the
international markets. Out of this US$1 billion was raised in June 2019, which was
the first dual and largest USD bonds transaction for Govt. owned Indian NBFC.

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This was also PFC's first borrowing from the international markets after the
successful acquisition of REC Limited.
In 2017, PFC was granted approval by the Ministry of Finance, Govt. of India, to
raise funds under section 54EC of the Income Tax Act 1961. PFC was the first
company to obtain such approval post the budget announcement in February
2017. PFC has raised more than Rs. 1,000 Crs under these bonds since their
launch in 2017.

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 EXECUTIVE SUMMARY
.

Resource Mobilization refers to all the activities involved in securing new and
additional resources for an organization.It also involves making better use of
existing resources and is often refferd as ‘New Business Development’ .It
advocates having the right type of resource at the right time at the right price by
making the right use of acquired resources thus ensuring optimum usage of the
same.

In this project, main focus remains on two core areas of Power Finance
Corporation (PFC) i.e. the fund raising process and use of financial
instruments(Cash instruments, derivatives, foreign exchange instruments etc.)

The analysis is based on Company’s last 5 years data in which it is highlighted

about whole fund raising process and use of derivatives in each financial year of
PFC.

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 RESOURCE MOBILIZATION
(With reference to PFC India Ltd.)
INTRODUCTION
Resource mobilization refers to all activities involved in securing new and
additional resources for your organization. It also involves making better use of,
and maximizing, existing resources. Resource mobilization is often referred to as
‘New Business Development’. The figure below shows how New Business
Opportunities – which are intended to mobilize resources – form part of an
organization’s overall functioning.

Figure 1: Resource Mobilization and its Role in an Organization’s Functioning

IMPORTANCE
Resource mobilization is critical to any organization for the following reasons:
1. Ensures the continuation of your organization’s service provision to clients.

2. Supports organizational sustainability.

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 3. Allows for improvement and scale-up of products and services the
organization currently provides.

4. Organizations, both in the public and private sector, must be in the

business of generating new business to stay in business.

OBJECTIVE OF THE RESOURCE MOBILIZATION UNIT

The main objective of the resource mobilization unit is to mobilize resources/raise
funds at minimum cost and easiest term & conditions keeping in mind the
requirements, objectives and financial positions of the company.
The 3 main decisions taken by the RM unit are:-
1. When to raise funds.
2. Pricing of the issue.
3. Instruments to be used for these funds.

Steps Required in Resource Mobilization in PFC Ltd.

1. Preparation of Board Agenda for the approval of the issue.
2. Selection of the merchant bankers.
3.Preparations of the information memorandum.
4. Innovation letter to Banker/ financial instrument.
5.Monitoring issue process on daily basis.
6.Deciding opening and closing time of the issue.
7.Scrutinizing application and making allotment.
8.Payment of the interest on application of the money.
9.Preparation of the accounting voucher.

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10.Coordination with statuary as well as government auditors.
11.Continuous connection with all other outsider agencies like SEBI, EXIM,
Corporate laws etc.
12. Continuous study of international as well as domestic market.
13. Preparation of Research project.
After getting liquidity statement from treasury management unit , the
requirement of the funds has to be tripled and the total demand of RM Unit has
increased by fold.
As a result , RM Unit has to decide when to raise funds for the company to ensure
 Cheapest cost
 Least pressure of obligation
 Satisfying company’s objective

AMOUNT OF FUNDS TO BE RAISED

The amount of funds to be raised annually is decided by AL & RM Unit.The various

factors to be kept in mind while deciding the amount of funds are :
1. Liquidity position of the company.
2.The amount of repayment that the company has to make.
3.The amount of disbursement it aims to do/carry out.
4.Position of repayment of it’s debtors.
5.The cost of funds in various markets.
6.Future predictions/projections about the behavioral market forces.

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 PRICING OF THE ISSUE
While deciding upon the prices of the security , there are various factors which
are needed to be considered.The factors which the company usually considers
are:-
1. Government sector rates
2. Liquidity position of the company
3. Primary/secondary market conditions
4. Other economic factors

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 INSTRUMENTS USED IN CAPITAL MARKET
Capital market is part of the financial market where savings and investments are
channeled between buyers and suppliers. Its deals with medium to long term
finance. Capital markets include primary and secondary markets.
There are two types of capital market Instruments

Types of Capital Market Instruments

1. Equity Security
2. Debt Security

Equity Security

 Equity Shares
Equity shares are also known as ordinary shares. Equity shares are those shares
which have rights to vote and enjoy the benefits of dividend in last after. Equity
shareholders are considered as real owners of the company. Equity shares are the
main source of finance of a firm.

 Preference Shares
Preference shares are those shares which have some certain special or priority
rights for the investors. They enjoy the benefits of dividend before equity
shareholders. Preference shares do not have voting rights.

Debt Security
 Debenture
Long-Term security which traded in capital market, issued by the company and
secured against assets. Debentures are the loan from the public. it provides the
fund to the company. a fixed rate of interest is given to the debenture holder. the
debentures redeem after a certain period. debenture holders do not have any
right in management.

 Bonds
A bond is a written income instrument that represents a loan made by a lender to
a borrower person. Bonds can be created by legally by I.O.U. between lender and
borrower that includes the details of the loan and its payments.

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 LIBOR
(London interbank offered rate)

LIBOR is a key interest rate benchmark used in PFC India (6 MONTHS + Interest
rate fixed by banks)
Let’s know more about this and why it is at the edge of being discontinued?
What is LIBOR?
The London Interbank Offered Rate, more commonly known as LIBOR , is one of
the most widely used benchmarks for determining short-term interest rates
across the world. Administered by the ICE Benchmark Administration (IBA), it
stands for Intercontinental Exchange London Interbank Offered Rate. It indicates
the average rate at which large banks in London can borrow unsecured short term
loans from other banks. The rate is given in five major currencies for seven
different maturities, the three-month U.S. dollar rate being the most common.
Uses of LIBOR

Lenders, including banks and other financial institutions, use LIBOR as the
benchmark reference for determining interest rates for various debt instruments.
It is also used as a benchmark rate for mortgages, corporate loans, government
bonds, credit cards, and student loans in various countries. Apart from debt

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instruments, LIBOR is also used for other financial products like derivatives
including interest rate swaps or currency swaps.

LIBOR DISCONTINUATION

Till the end of 2021, LIBOR will be ending after several years of scandal because
LIBOR rates are set by banks submitting their own estimates of their borrowing
costs, they can easily be manipulated by the banks themselves.

While this diminished the credibility of LIBOR, it continued as the primary

benchmark for global lending rates. But in 2017, the Financial Conduct Authority
(FCA), a conduct regulator for financial services firms and financial markets,
announced LIBOR would be discontinued in 2021. The phase-out reflects a
growing desire from regulators who prefer to see reference rates based on actual
transactions as opposed to subjective judgments from banks.

The decision to end the use of LIBOR was taken by a collection of global
regulators and central Banks, notably in the UK, US and Europe. The
rationale for doing so was primarily because LIBOR submissions are based
on judgement by the panel contributors, rather than a specific formula or
observed transactions.

In addition, the number of submitting banks has decreased over recent

years, whereas the volume of transactions linked to these LIBOR has
increased. Regulators are therefore looking to replace LIBOR with a more
representative and robust benchmark.

ALTERNATIVES FOR LIBOR( With Ref. to PFC)

In March 2020, a group of private-market participants and regulators known as

the Alternative Reference Rates Committee (ARRC) proposed legislation in New
York that would protect parties in adopting a new benchmark known as the
secured overnight financing rate, or SOFR. SOFR is based on transactions in the
U.S. Treasury repurchase market, where banks and investors borrow or lend
Treasuries overnight. Since it references actual transactions, it is expected to be
more accurate and difficult to manipulate than LIBOR.

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There are two methods to change rate from LIBOR to other alternative rate:
1. Transition in advance
2. Fallback as much as possible
Generally , transition in advance is recommended because fallback involves some
problems like value transfer and additional operational burden.
And if a company uses derivative transactions using LIBOR as the index ,
regardless whether you choose 1. Or 2. , there is a possibility that there will be
Mark-to-Market(MTM) value adjustment due to market conditions.

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Which benchmarks and solutions should a corporation consider using?
Corporations can enter into derivative contracts, issue bonds, and set up loan
agreements using RFRs. In Europe, there is an added twist -- benchmark
regulations stipulate that any new reference rates must be benchmark-compliant.
The International Organization of Securities Commissions (IOSCO) has developed
19 high-level principles for fixed income benchmarks, with a focus on robust
methodologies, oversight, and management by an endorsed benchmark
administrator. With this in mind, the RFRs calculated by central banks will be
compliant, and while new providers may emerge, their proposed rates will also
have to meet the IOSCO requirements. Potential solutions include financial
instruments like OIS basis swaps and legal instruments,(e.g., new agreements),
which will require decisions on deal structure and platform (e.g., bilateral or CCP).

How should transition trades be executed?

Globally, the leading corporations prefer to use an electronic platform for trading
cash bonds, repos, credit default swaps (CDS),interest rate swaps (IRS), exchange-
traded funds (ETFs), equity derivatives, and foreign exchange derivatives (FX). If a
company does not have its own service, it can use Bloomberg’s multilateral
trading facility (BMTF), or its swap execution facility (BSEF).
By considering all their options now, corporate executives can prepare
themselves for the unknowns to come in the brave new world of risk-free rates.

PFC PERFORMANCE HIGHLIGHTS

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 (Year ended 31st March 2021)

PFC Group Structure

Strong Performance in FY21

Recent Developments

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 Power sector (source:CEA)

 Electricity generation rose by 42.5% in April’21 from April’20.

 Solar capacity addition in Jan-March’21 fastest since 2019.
Economic growth indicators (source: Media reports)
 Covid-19 vaccines roll out momentum to pick up in FY 21 leading to rise in
industrial activity.
 RBI cuts India’s GDP estimate by 1% to 9.5%
Market Indicators (source:RBI)

 RBI maintains accommodative stance while ensuring inflation remains

within targeted range going forward.
 System liquidity remained in large surplus in April & May 2021.

Asset Quality

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Net NPAs continue their downward trend.
(Net NPA ratio based on RBI norms)

-Rs. 3,70,771 cr. Loan book as on 31.03.2021.

Provisioning status as on 31.03.2021

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63% provisioning against stage III assets (NPA) (Rs.’crore)

(Note- Provision has been made in respect of all loans assets as per expected credit loans
assets as per expected credit loss(ECL) methodology under Ind As.

Resolution Status

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 Resolution status of Rs.21,150 cr. Of loan assets in stage III.

Disbursement Composition
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Aatmnirbhar Discom scheme status as on 31.03.2021
Sanctions – Rs.68,914 cr. & Disbursement – Rs.36,439 cr.

Borrowing Strategy

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  PFC continues it’s focus on diversifying funding mix and launched public
issue of taxable bonds in FY’21.
 PFC has enhanced it’s Asset Liability management – surplus liquidity for
upto 1 year.
 Well managed liquidity – implemented RBI’s LCR framework.

Liability Mix (As on 31.03.2021)

 86% exchange rate risk hedged for FCL with 5 years residual majority.

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Shareholder Outlook

Consolidated Snapshot
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BIBLIOGRAPHY
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BOOKS
Grewal T.S , Analysis of financial statements
NCERT ,Business studies , Part-II (Business finance and marketing )

WEBSITES
https://en.wikipedia.org/wiki/Power_Finance_Corporation
https://pfcindia.com/Home/VS/5
https://pfcindia.com/DocumentRepository/ckfinder/files/Investors/
Bonds/Roadshow_Presentation/Roadshow_presentation0182018.pdf
https://pfcindia.com/Home/VS/110
https://www.arborcrowd.com/real-estate-investing-learning-center/
libor-ending-2021/

OTHERS
 Presentation
-LIBOR Transition by MIZUHO.
 Article
-What should corporations consider when migrating from LIBOR
Referance rates by BLOOMBERG.

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