Financial Daily from THE HINDU group of publications
Wednesday, Sep 10, 2003
Financial Daily from THE HINDU group of publications Wednesday, Sep 10, 2003 |
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Money & Banking
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Financial Institutions REC to become a `zero Govt debt co' soon Our Bureau
Chennai , Sept 9 RURAL Electrification Corporation (REC) proposes to repay Rs 2,200 crore of Government loans back to the Government, this year. With this, REC would be a "zero Government debt" company. REC also proposes to start funding power projects — both transmission and generation, the company's Executive Director - Finance, Mr Abhay Mishra, told a press conference here. The press conference was held as part of REC's road shows to market its bond issue. The company hopes to collect Rs 4,500 crore through an issue of 5-year bonds, bearing an interest rate of 5.6 per cent. Investors who invest in the Triple-A rated bonds are allowed capital gains exemption under Section 54 EC of the Income Tax Act. Asked to comment on a recent Disinvestment Commission report, which said that REC's operations were unsustainable, Mr Mishra said that the Commission was wrong in its conclusions. He said that the Commission had said taken a negative view of REC's dependence on only one customer, namely the State electricity boards, for its business, but then, that is true of now just REC, but all power utilities. "If the other power utilities (such as NTPC, NLC) are profitable, then why not REC," Mr Mishra said. Secondly, he said that the Commission had taken the figures of 2001, in calculating REC's non-performing assets (NPAs).However, REC has since reached zero NPAs, partly by reschedulement, partly by recoveries. Mr Mishra pointed out that Crisil had given a Triple-A rating to REC's bonds. He said that the company's average cost of borrowings worked out to about 6.25 per cent. The average lending rate would be around eight per cent. Last year, it disbursed about Rs 6,600 crore last year. Disbursements in the current year would be about Rs 8,000 crore, Mr Mishra said.
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