Rec To Net Rs 84 Crore Via Debt Shedding

The Rural Electrification Corporation (REC) has raised over Rs 1,000 crore in the current fiscal.

The company has used a part of this mop-up to retire debt to the tune of Rs 600 crore resulting in interest savings of about Rs 84 crore in the next seven years. The balance funds will be used for its sanctions and disbursements programme.

Last year, the corporation had raised only about Rs 1,600 crore through its various bond floats.

REC is a financial institution promoted by the Union government to fund power projects in the rural sector.

The company has raised about Rs 700 to Rs 800 crore -- mainly from pension and mutual funds -- through bond issues in the last couple of months.

In addition, it has garnered about Rs 400 crore through bonds which enjoy benefits under Section 54 EC of the Income Tax Act.

This means that the retail investors who have invested in these bonds need not pay capital gains tax.

This is an on-tap issue and the coupon rate is in the 8.5 to 9 per cent band. These five-year bonds have a lock-in period of three years with a put option after this.

The corporation sanctioned Rs 6,308 crore last year and disbursed about Rs 4,100 crore. "We are targeting a 20 per cent increase in sanctions and disbursements in 2000-02. We are also interested in improving the quality of our assets," said Divakar Dev, chairman, REC.

The corporation's main clients are the state electricity boards. It has huge outstandings from the electricity boards of Madhya Pradesh, Uttar Pradesh, Bihar, West Bengal and Assam.

Dev said despite the Dabhol crisis, the Maharashtra State Electricity Board (MSEB) had not defaulted in its payments. "MSEB continues to be one of our best customers," he added.

REC has now started funding electrification programmes now in small towns as well.

Last year, it earned a record profit before tax of Rs 453 crore and a net profit of Rs 336.90 crore. It has a net worth of Rs 2,148.3 crore, while the paid-up capital of the company is Rs 730.6 crore.