Power Finance Corporation (PFC) may partner Edelweiss Financial Services for the $1-billion private equity (PE) fund it plans to establish. The power sector lender is in the final stages of zeroing in on a fund manager.
“The last date for receiving the bids was January 11. Edelweiss Financial Services is the only one to bid,” Satnam Singh, chairman and managing director, PFC, told Business Standard.
The company feels the clause on the exposure limit to the power sector might have acted as a deterrent for many firms that were keen to bid. “There was a clause that the bidders should not have more than 25 per cent exposure in the power sector, as it would lead to a conflict of interest with our business,” Singh said. The top firms which may have expertise in managing the fund have substantial exposure in the power sector, he added.
While the government-controlled, non-banking financial company received only one bid, it can still go ahead with the decision to choose Edelweiss as its partner. “It was agreed in case we receive only one bid, we can go ahead with our decision,” Singh said. The committee set up to take decisions on the fund would meet to take the final call, he added.
The fund would be established on a partnership basis, and PFC would own 49 per cent of the fund, while 51 per cent would rest with the partner. “We will begin the fund with $300 million and our contribution will be five per cent of the total. The same would hold good for the partner,” Singh said. The size of the fund would be increased to $1 billion in tranches. The profits earned would be distributed among the investors. “We would assess the best market practice while giving returns to investors. The returns would certainly be above 10 per cent,” he said. The fund would seek to provide equity support to various power projects in the country.