PFC appoints merchant bankers for Rs 5,600-cr follow-on public offer

PTI New Delhi | Updated on February 24, 2011 Published on February 24, 2011

Mr Satnam Singh, CMD, Power Finance Corporation Ltd. (file photo)

Power Finance Corporation has appointed four merchant bankers — Goldman Sachs, JM Financial, DSP Merill Lynch and ICICI Securities — to manage the Rs 5,600-crore follow-on public offer.

“Goldman Sachs, JM Financial, DSP Merill Lynch and ICICI Securities have been chosen to handle PFC’s follow on public offer (FPO),” the company Chairman and Managing Director, Mr Satnam Singh, told reporters here today.

The Cabinet Committee on Economic Affairs had approved the company’s FPO earlier this month.

PFC will also infuse 15 per cent fresh equity by issuing 17,21,65,005 shares of Rs 10 each. The offer would comprise 5 per cent disinvestment of the Government’s share in PFC through putting 5,73,88,335 crore shares of Rs 10 on sale. At the current market price, the issue is likely to fetch Rs 5,656 crore.

About the company’s plan to enter the capital market, Mr Singh said: “we are still working on the Draft Red Herring Prospectus (DRHP) and the FPO is likely to hit the markets in the first quarter of the next financial year.”

The Government holds 89.78 per cent stake in the public sector company. The market capitalisation of PFC at present stands at Rs 28,854 crore.

The company had earlier divested 10 per cent stake through an initial public offering (IPO) in 2007. After the proposed FPO, the Government’s stake may go down to about 85 per cent.

The reservation of equity shares for PFC employees are 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 the 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 for industrial finance company status. It will also enhance the equity base of the company to enable it to meet the growing future investment needs of the power sector.

Besides, Mr Singh said the company’s board has given approval to set up PFC Capital Services Ltd into a separate subsidiary, which will focus on advising mergers and acquisitions.

PFC is a non-banking financial institution that provides loans for various power projects in generation, transmission and distribution segments as well as for renovation and modernisation of the existing power projects.

The Government has set a target of raising Rs 40,000 crore from disinvestment this fiscal against Rs 25,000 crore last fiscal.

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Published on February 24, 2011
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