PFC approves $1-bn PE fund

Power sector lender Power Finance Corporation (PFC) on Wednesday said it had approved a proposal to launch a $1-billion private equity fund, and that this may be put in place over the next six months.

“Our board has approved a proposal to launch a private equity fund and has also given its approval to select a partner for the fund. The fund would be of an overall size of $1 billion,” Chairman and Managing Director Satnam Singh said after a board meeting on Wednesday.

“Initially, we shall start with $300 million. We would then select a partner for it, make a trust, and then an asset management company. This may take around six months,” he said, adding, “We shall contribute to the trust to the extent of five per cent.”

 

“Our board meeting held on Wednesday has decided we would go for a tender for selecting a partner for this private equity fund,” Singh said. “We specialise in lending to power projects, but we do not have expertise in fund management. Therefore, we can jointly launch the fund through synergy with our partner’s core competence in fund management. The tender to select an Indian partner for the fund shall be out soon,” Singh said.

“For banking, we are in the process of advertising, and are still looking to hire a consultant,” he added.

PFC is entitled to raise Rs 6,900 crore through infra bonds, and Rs 5,000 crore through tax-free bonds. So far, it has raised Rs 425 crore through tax-free bonds and Rs 90 crore through infra bonds in first tranche, Singh said.

The company, through the medium-term note programme, has proposed to raise $1 billion through external commercial borrowings, and this is expected to be completed by December next year, said an official in PFC’s finance department. “Our fund-raising for infra and tax-free bonds would be completed by March 2012,” Singh said.