The Centre has cleared a follow-on public (FPO) offer of the state-run lender Power Finance Corporation (PFC). The issue, which is likely to come out during the first quarter of the next financial year, entails a 5 per cent disinvestment of Government's shareholding in PFC and the company raising 15 per cent fresh equity.

While the issue is expected to garner upwards of Rs 5,700 crore based on the current market price of the stock, the exact amount can be firmed up only after a meeting of the Empowered Group of Ministers (EGOM) shortly to decide on the offer price. Share of the non-banking financial institution, which provides loans for power projects, closed Thursday's trading at Rs 251.95, down 1.56 per cent on the BSE.

“The Cabinet Committee on Economic Affairs (CCEA) today approved the follow-on public offer of the PFC,” an official statement issued after the meeting said here. The Government currently holds 89.78 per cent stake in the public sector company. After the proposed issue, the Centre's stake is expected to go down to about 85 per cent. PFC had earlier divested 10 per cent stake through an initial public offering in 2007. The official statement said that the reservation of equity shares for PFC employees is subject to the limit prescribed for retail investors by SEBI, which will not exceed 0.12 per cent of the issue size. A discount of 5 per cent of offer price will be given to retail individual investors and eligible employees.

The public offer would help PFC to meet the eligibility requirement of maintaining a CRAR (Capital to Risk Assets Ratio) of 15 per cent mandated under the IFC (industrial finance company) status. The offer will also enhance equity base of the company to enable it to meet the growing future investment needs of the power sector, company officials said.

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