PFC to set up PE fund with Tata Capital

State-run Power Finance Corporation (PFC) said it would set up a $1 billion private equity (PE) fund in joint venture with Tata Capital to invest in the equity of private power projects. Tata Capital will hold 51 per cent equity in the joint venture company, while PFC shall own 49 per cent.

"PFC is in the process of finalising the terms of the joint venture agreement. The fund is expected to become operational in the next six-nine months," said R Nagarajan, Director (Finance), PFC on the sidelines of a press conference to launch the company's tax free bonds.

The company's target for sanctions this fiscal stood at Rs 45,140 crore, of which it has sanctioned Rs 41,732 crore. Out of Rs 40,000 crore distribution target it has disbursed Rs 17,555 crore as on September 2012, Nagarajan said. PFC's outstanding sanction (order book) stands at Rs 1.68 crore, which will help the company disburse the remaining Rs 23,000 crore.

As per the Twelfth Five Year plan projections the government is targeting investments to the tune of Rs 45 lakh crore in infrastructure sector, of which Rs 14 lakh crore is expected to be in power sector. The total disbursements as per company balance sheet is Rs 1.40 lakh crore.

PFC's average cost of borrowing as on September 30, 2012 stood at 9.16 per cent, while its net interest margin (NIM) was 4.23 per cent. The interest spread of PFC (difference between borrowing cost and lending rate) stood at 2.68 per cent, which has gone up compared to 2.25 per cent as on March 31, 2012. The government has 73.72 per cent equity shareholding in the company, which up till 2007 used to be a fully government owned entity.