Govt to kick off FY16 divestment with REC's up to $250 million stake sale

MUMBAI (Reuters) - The government has set the floor price for an up to $250 million share sale in state-run Rural Electrification Corp Ltd at 315 rupees apiece, kicking off its stake divestment programme for the fiscal year that started on April 1.

The government, which owns 65.6 percent in REC, will sell on Wednesday a 5 percent stake through an auction to portfolio and retail investors on the stock exchanges, according to a government notice.

The base price for the auction, announced on Tuesday, is a discount of nearly 2 percent on REC's last traded price.

The share sale is part of New Delhi's plan to raise about $11 billion through asset sales during the current fiscal year to March 2016. The asset sales are crucial to meet a fiscal deficit target of 3.9 percent of GDP for 2015/16 fiscal year.

 

The government has missed its divestment target for the past five years. A shortfall in receipts from stake sales and taxes has led to cuts in public spending of about $48 billion in the past three years, slowing economic recovery.

Morgan Stanley, and Indian merchant bankers IL&FS Broking Services and JM Financial are the managers for the REC sale.

($1 = 62.2642 rupees)

(Reporting by Devidutta Tripathy; Editing by Sumeet Chatterjee)