New Delhi, April 12
POWER Finance Corporation (PFC) plans to enter the capital market in June with its initial public offering (IPO). The institution, which lends exclusively to the power sector, is also mulling a foray into the banking and insurance sectors to tap cheaper funds.
"We could be entering the capital market with our public offering around June. We are presently awaiting the Government's approval for the issue," PFC's Chairman and Managing Director, Mr Arvind Jadhav, told reporters while announcing the company's annual results. The corporation is planning to raise up to 10 per cent of its equity through the offer, Mr Jadhav said, adding that the Union Government may also divest an equal amount of equity. "The Government may follow the NTPC model to ride piggyback on the public offering to disinvest its stake," he said.
PFC has reported a 39 per cent dip in net profit to Rs 980 crore in 2004-05, mainly due to changes in the accounting policy for loans of five years or beyond. On the future business focus, Mr Jadhav said PFC is looking at entering the banking and insurance sectors to raise resources at cheaper rates. "We are examining the possibilities, it will depend on the regulatory framework," he said. "We may go for a tie-up with existing players in the two sectors... looking at the market, at present, life insurance is the cheapest way of raising long gestation funds," Mr Jadhav said. An internal group is looking into the issue and a decision would be taken after the group submits its report.
Taking about the results, Mr Jadhav said the decline in the net profits is due to a change in accounting policy in terms of loans and tax payment (from cash to accrual basis). Additional deferred tax liability for the special reserve lowered the income for the financial year ending March 31, 2005 by Rs 141.62 crore.On a like-to-like basis, net profit increased from Rs 804 crore to the present level of Rs 980.20 crore.
During the last fiscal, the corporation disbursed Rs 9,405 crore against disbursements of Rs 8,974 crore in 2003-04. Loan sanctions increased 12 per cent to Rs 18,573 crore in 2004-05 from Rs 16,472 crore. PFC is targeting sanctions of around Rs 17,625 crore and disbursements of Rs 9,515 crore in 2005-06.
The corporation also plans to raise about Rs 9,500 crore from bonds, short and long term loans and external commercial borrowings during the current fiscal, Mr Jadhav said, adding about 10 per cent would be from the overseas market.