PFC to raise fresh equities post-NBFC-IFC tag

The state-run lender Power Finance Corporation may raise fresh equities through a follow-on public offer after the Reserve Bank accords it an NBFC-IFC status.

There are four types of NBFCs (non-banking finance companies)--asset finance companies (AFCs), loan companies, investment companies and IFCs (infrastructure finance companies). IFCs were added to the NBFC category this February. PFC is a loan company.

"Once we get classfied as NBFC-IFC by the Reserve Bank we would have to raise fresh equity to meet our capital adequacy ratio," PFC chairman and managing director Satnam Singh told reporters here today.

The current capital adequacy ratio (CAR) requirement is 10 per cent for banks while for an NBFC-IFC it is 15 per cent. "Our CAR is 17.38 per cent as against the requirement of 10 per cent, so right now we do not need surplus funds," Singh said, adding however, after the NBFC-IFC status the gap would be narrowed and we would need to raise funds from the market.

PFC’s current exposure limit to a single private company is 20 per cent of its networth and to a single private group 35 per cent.

The government currently holds 89.78 per cent stake in PFC. It had divested 10 per cent stake by way of an initial public offer in 2007. After the proposed divestment it may go down to about 80 per cent.