PFC to appoint consultant for banking foray

To explore opportunities in the banking segment, state-run Power Finance Corporation (PFC) will appoint a consultant soon.

“We have shortlisted five firms and a final decision will be taken by the end of this month,” a senior PFC official told Business Standard. The company has been contemplating acquiring a strategic stake in a bank or a complete takeover.

A banking foray will enable PFC, is one of the biggest lenders to the power sector, to access low-cost funds. Banks have access to savings and current account deposits, which bring down the costs, while other lenders such as PFC borrow from multilateral lending institutions.

Last year, the board of the company had approved the appointment of a consultant to conduct necessary due diligence. PFC is hoping to get a banking licence, with the reserve Bank of India (RBI) planning to issue new ones in the 2011-12 financial year, the PFC executive said.

It has also appointed four merchant bankers — Goldman Sachs, JM Financial, DSP Merill Lynch and ICICI Securities — to manage its Rs 5,600 crore follow-on public offer, expected to come out in the first quarter of next year.

The company is still working on the draft.

Earlier this month, the Cabinet committee on economic affairs had approved the FPO of PFC. At the current price, the issue is likely to raise Rs 5,656 crore. Currently, the government holds 89.78 per cent stake in PFC. It had first divested 10 per cent stake through an initial public offering in 2007. After the proposed FPO, the government's stake may go down to about 85 per cent.