According to marketmen, with institutions like ICICI and IDBI tapping the market at 14 per cent, there is no way investors would have subscribed to the PFC issue at that rate. ``The minimum coupon rate would have had to be around 14.5 per cent, which would have resulted in PFC raising high cost funds,'' a said a Delhi-based broker. It is not surprising that PFC preferred to opt for privateplacement of Rs 100 crore with an unspecified green-shoe option. The regular return bonds, with a face value of Rs 1 lakh, had a tenure of 10 years and a put and call option excisable at par at the end of seven years.

The PFC official said the institution had a resource mobilisation target of Rs 2,000 crore. So far, the institution has raised Rs 800 crore through private placement of bonds and Rs 420 crore through a foreign currency bond issue in July 1998. ``Loan realisations and internal accruals will take care of the rest,'' the official said, adding that PFC's cost of funds during 1998-99 has been below 14 per cent. ``We have not fared badly considering that institutions like ICICI and IDBI are raising money at around 14 per cent,'' he noted.

Market sources say PFC's decision to shelve the issue is prudent as the institution may not have received a good response from retail investors. First, the issue would be competing with ICICI, IDBI and possibly IFCI. Second, Power Finance Corporation does nothave much of a brand value in the retail segment unlike the two Mumbai-based institutions who have been nurturing the retail segment with a series of public issues. According to them, PFC's tax-free bond issue have in the past not fared well and the institution had been forced to extend the issue closure date.

So far as the next fiscal is concerned, the official said PFC's resource mobilisation programme would be dictated by the market conditions. ``We are open to the idea of a retail issue, but it has to be on our terms,'' the official added.