Orissa Panel Seeks 26% Selloff In Power Corp

The government had proposed to disinvest 25 per cent equity in the corporation, fully owned by the state, but the committee has ruled in favour of a higher stake to make the offer attractive to the strategic investor, keeping in view the depressed capital market.

We realised that the prospective investors were not enthusiastic about taking up a 25 per cent stake as the government, with a 75 per cent holding even after the disinvestment, could ignore their views in passing special resolutions which require a three-fourths majority for adoption, said a source in the state energy department. He said disinvestment of 26 per cent equity will give investors a greater say in the companys affairs.

 

Sources said the current disinvestment was the first step towards privatisation of the corporation as the government intended to off load a controlling 51 per cent stake in the long run. The present equity base of the company, which runs two new thermal units of 210 mw each at Ib valley, is Rs 450 crore.

SBI Capital Markets, ICICI Securities and DSP Financial Services have been short listed by the government for appointment as merchant bankers to the disinvestment issue. However, sources said DSP Financial Services was likely to get the job. The company had earlier assisted the Orissa government to raise Rs 130 crore through private placement of its steel bond issue in 1994.

Like the steel bond issue, the government intends to go in for private placement of the disinvested shares of the corporation. This is mainly to save cost, said a senior official in the state public enterprise department. If we go in for a public issue at this juncture, the cost of raising the fund will be about 10 per cent of the total issue value, he said. The government will however invite bids during placements to get the best price.

At the beginning of the year, the government had proposed to raise about Rs 300 crore from the disinvestment. This was also accounted for in the 1995-96 budget. However, differences still persist on the premium to be charged on the shares to be disinvested. The face value of the shares, 26 per cent of the total equity base of Rs 450 crore, works out to Rs 117 crore.

While the prospective merchant bankers have suggested that the shares may fetch a premium of between Rs 10 and Rs 20, the government is hopeful of getting a better deal, mainly on the strength of the corporations performance.

The corporation, in the very first year of commercial operation (1995-96), had posted a gross profit of Rs 64.29 crore and a net profit of Rs 23.93 crore over an income of Rs 166.56 crore.

The company was then operating only one unit of 210 mw. With the second unit of identical capacity going on stream this year, the corporation has, in the first six months, recorded a gross profit of Rs 75.16 crore and a net profit of Rs 54.89 crore over a sales income of Rs 155.33 crore. In the corresponding period last year, it had recorded a gross profit of Rs 15.99 crore and a negative net profit of Rs 7.85 crore over a sales income of Rs 69.20 crore.

However, non-payment of dues by the Grid Corporation of Orissa, the sole purchaser of the power generated by the corporation, has created a cash crunch for OPGC. The dues towards energy bills now stand at Rs 120 crore.

An energy department official said the OPGC will be able to command a higher premium on its shares if the Grid Corporation of Orissa paid even half the amount.

The government is firm on completing the disinvestment process by March next year, in keeping with its budgetary commitments.

Of the total disinvestment income, the government intends to retain 50 per cent, while the rest will be ploughed back as equity investment in two more units of 210 mw each planned by the OPGC at the Ib valley complex. The cost of the two existing units of the corporation, whose construction had begun in late 1980s, was Rs 1,060 crore. The two proposed units are expected to cost Rs 1,600 crore.