PFC files draft prospectus for IPO

The UPA government today kick-started its divestment programme for the year by offering to sell five per cent of its stake in the Power Finance Corporation (PFC).

The company will simultaneously undertake a fresh issue of equity shares amounting to 10 per cent of its expanded equity base. It is offering an aggregate of up to 154,567,500 equity shares of Rs 10 each for cash through a book-building process.

PFC filed its draft Red Herring Prospectus with Sebi on Monday. A top company official said PFC was going ahead with the initial public offer despite the volatility in the equity market.

The official declined to indicate a date for the issue or the amount it expected to raise. Disinvestment department sources indicated a July timeline for the issue.

PFC at present sanctions around Rs 20,000 crore for state and private sector power projects. The public offer will help to expand the kitty to around Rs 30,000 crore by 2010, power ministry officials said.

The company has appointed Enam Financial Consultants, ICICI Securities Ltd and Kotak Mahindra Capital Company Ltd as book running lead managers to the issue.

The PFC issue will be followed by Powergrid Corp's IPO and then by the public issues of the Rural Electrification Corporation and National Hydroelectric Power Corporation.

The power ministry wants that most public sector power companies should organise the financial resources for their annual expenditure without depending on gross budgetary support from the government.

"Once the IPOs are through, the companies' dependence on budgetary support may be negligible. PFC and REC are not dependent on such support, while NHPC may need some support for four years after the issue," sources said.

At present, two power PSUs are listed on the stock market. NTPC Ltd raised Rs 2,684 crore from its 10 per cent float in November 2004, while Power Trading Corporation raised Rs 94 crore in March 2004.