The RP Sanjiv Goenka Group on Friday announced partial demerger of flagship CESC Ltd as it failed to convince the state power regulator -- West Bengal Electricity Regulatory Commission (WBERC) -- to get its power purchase agreement (PPA) approved.
The power utility announced demerger of non-power businesses of CESC and its subsidaries which have now been transferred to two new entities -- RP-SG Retail Ltd and RP-SG Business Process Services Ltd.
CESC will now retain only the power business.
Under the orignal scheme, the groups power business was supposed to have been divided into two generation and distribution, while its retail arm, led by Spencers Retail, will become the third company.
The rest of the companys business verticals will form the fourth entity.
In a stock exchange filing, the company said that except part III relating to demerger of generation undertakings, part IX relating to reduction of capital and reorganisation of reserves of Haldia Energy Ltd and part XII (Sec 1) relating to reduction of face value of equity shares of the company, will file the National Company Law Tribunal (NCLT) order with the Registrar of the Companies and make the scheme effective from October 1, 2017.
Demerger of these parts would be effective post WBERC approval, CESC said.
If things go as per plan, two more companies would be created -- one for power distribution and the other for generation.
"We had received petition for power purchase agreement but unless the company splits, question of approval of the petition (for PPA) does not arise. First, they have to take commission's approval for the demerger," West Bengal Electricity Regulatory Commission (WBERC) chairman R N Sen told PTI.
Sen said NCLT's nod does not qualify for "automatic approval" from WBERC, he said.
Sen said the company needs to take WBERC's prior approval under Sec 17(3) of the Electricity Act 2003 and regulation 5.11.3 of the West Bengal Electricity Regulation Commission (licensing and conditions of license) Regulations, 2013 before the commission takes up for approval of the PPA.
Just informing the commission is not enough, they have to seek an approval, he said.
In the demerger process, huge asset transfer is involved which has a potential impact on benefits on power consumers which the commission cannot ignore, Sen said.
For every 10 shares, CESC shareholders will get six fully paid equity shares of Rs 5 in RP-SG Retail Ltd and two shares of Rs 10 each of RP-SG Business Process Services Ltd, the power utility said in the filing.
The record date had been fixed on October 31, 2018.
The company also said 5 lakh fully paid up preference shares of Rs 100 each of RP-SG Retail Ltd shall be issued and allotted to the company.
The CESC scrip closed at Rs 899.70 apiece on Friday at the Bombay Stock Exchange, up 6.32 per cent.