Cabinet approves PFC FPO

The Cabinet Committee on Economic Affairs has approved the follow-on public offer (FPO) of Power Finance Corporation (PFC). The issue will raise 15 per cent fresh equity besides five per cent disinvestment of government holding in the company.

The fresh issue of share will help PFC meet its eligibility requirement of maintaining a capital-to-risk assets ratio of 15 per cent for Industrial Finance Company status. “The issue of fresh shares will help the company to enhance equity base to enable it to meet the growing future investment needs of the power sector,” said a government statement.

Disinvestment secretary Sumit Bose told Business Standard the issue would come only next financial year and was not on fast track. The government currently holds 89.78 per cent stake in the public sector company. After the follow-on issue, the government will come down to about 85 per cent. At the current valuations, the issue will raise Rs 5,732 crore. The market capitalisation of PFC currently stands at Rs 28,854 crore.

The government also decided to reserve equity shares for PFC employees subject to the limit prescribed for retail investors by Securiteis and Exchanges Board of India, which will not exceed 0.12 per cent of the issue size. Retail investors and employees will get a discount of 5 per cent on the offer price.

PFC is a non-banking financial institution that provides loans for various power projects in generation, transmission and distribution sector as well as for renovation & modernisation of power projects. The government had in 2007 disinvested 10 per cent in the company.