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Our Bureau

Public offer of fresh shares likely in first quarter of next fiscal

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New Delhi Feb. 8 The Cabinet Committee on Economic Affairs (CCEA) on Thursday reinitiated the disinvestment process and approved the initial public offer (IPO) of fresh shares in three public sector power utilities along with sale of five to 10 per cent Government existing equity.

The three companies are Rural Electric Corporation (REC), Power Grid Corporation of India (PGCIL) and National Hydroelectric Power Corporation (NHPC) and the Government hopes to mop up a total of about Rs 4,381 crore through the exercise, the Finance Minister, Mr P. Chidambaram, told presspersons after the meeting.

Informed sources said that the IPOs are likely to hit the market during the first quarter of fiscal 2007-08 and PGCIL is likely to appoint the lead managers for its public issue by next week.

About any possible opposition to disinvestment, Mr Chidambaram said the Left parties were consulted before taking the decisions. "I and the External Affairs Minister had met the CPI (M) leaders in early January. Then I had also met the CPI leaders," he said.

According to the Finance Minister, issue of 10 per cent fresh shares of REC is estimated to garner around Rs 420 crore, 10 per cent fresh issue in PGCIL could mop up Rs 971 crore and 10 per cent fresh share offering by NHPC could bring in another Rs 1,490 crore. This takes the total amount received through issue of fresh shares to approximately Rs 2,881 crore.

Stake dilution

Without giving any timeframe, the Finance Minister said that as and when these companies decide to go in for their respective IPOs, the Government would piggyback on it as was done in the case of NTPC and dilute a small portion of its shares in these companies. It would sell 10 per cent stake in REC and five per cent each in PGCIL and NHPC, he said.

"These companies are 100 per cent Government owned now. Selling of small portion would not change the PSU character of the companies as the Government will have overwhelming majority even after equity dilution," he said

The proceeds from the sale of Government equity are likely to generate around Rs 1,500 crore.

Post-issue, the Government stake in REC would be 81.22 per cent and 86.36 per cent each in PGCIL and NHPC.

National investment fund

The Finance Minister also made it clear that while the proceeds from sale of fresh shares would go to the respective companies to fund their expansion plans, the proceeds from Government equity sale would be canalised to the National Investment Fund (NIF) announced in 2005.

"This fund will go into the NIF as a corpus to be used for social sector projects and will not be used for revenue expenditure or for current expenditure," he said.

He, however, clarified that all these amounts are only notional and the real figures may differ.

"These are estimates based on the companies book value and the financials. The companies would decide on the price band in consultation with the lead managers and also the timing of the issue based on market conditions over the next several months," he said.

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Cabinet approves IPOs of three power PSUs

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