When a transformer is on no load, the only current flowing is the magnetizing current, which is necessary to establish the magnetic flux in the core. This current is predominantly out of phase with the voltage and is much smaller compared to the current under full load. The magnetizing current is mostly reactive, resulting in a low power factor.
The power factor on no-load conditions is generally around 0.35, as the magnetizing current is primarily inductive. As the load increases, the power factor improves and approaches 1.