In a move that will help Power Grid Corporation of India (PGCIL) fund its expansion plans, the Centre today approved a follow-on public offer (FPO), constituting 20 per cent of its existing paid-up capital. At the current market valuation, the FPO is likely to mop up Rs 8,400 crore. The company may come out with the issue by the end of October.
According to a decision taken by the Cabinet Committee on Economic Affairs, the issue will comprise 10 per cent equity dilution by the government and isuue of 10 per cent fresh equity by the company. Currently, the government holds 86.36 per cent stake in PGCIL. A total of 84,17,68,246 equity shares would be on offer.
Speaking to Business Standard, PGCIL Director (finance) J Shridharan said: “We will file the draft red-herring prospectus with Sebi in the first week of October and come out with the issue by October-end.” He said the company needed to raise fresh equity since it was in need of about Rs 4,000-4,500 crore to make up for the equity deficit.
Regulatory norms require 30 per cent equity funding of projects. While the fresh capital raising would be used to part fund the investment requirement of about Rs 58,000 crore of the PSU, it will also put money in the hands of the government, whose market borrowing this financial year accounts for over 40 per cent of the Budgeted expenditure.
Today’s decision of 10 per cent disinvestment in PGCIL by the Centre is in line with the government’s intention to raise Rs 40,000 crore from disinvestment during the current financial year. For this, the government would sell stake in about 10 more PSUs, including Indian Oil, Coal India, SAIL, RINL and Shipping Corporation.
PGCIL had hit the capital market in October, 2007, with its maiden public offer, comprising issuance of 10 per cent fresh equity and 5 per cent disinvestment by the government.
The company plans to augment its transmission capacity by 18.2 per cent in the current financial year to 23,400 Mw from 19,800 Mw in 2009-10.
