State-run power projects financier Rural Electrification Corporation (REC) today said it plans to use about three-fourths of its follow-on public offer (FPO) proceeds for operations, while the remaining would go to the government.
"We intend to utilise the entire net proceeds (from the issue) during fiscal 2010 to augment our capital base to meet the future capital requirements arising out of growth in our assets, primarily our loan and investment portfolio, and for other general corporate purposes," REC Chairman and Managing Director P Uma Shankar told reporters here.
Shankar said three-fourths of the proceeds from the issue would be directed toward REC's operations, while the remaining one-fourth would go to the government of India.
The company plans to sell 17.17 crore shares through the FPO, which will constitute 17.39 per cent of its fully diluted post-issue capital. The issue consists of a fresh issue of 12.87 crore equity shares and an offer for sale of 4.29 crore shares.
An Empowered Group of Ministers (EGoM), Shankar said will fix the floor price for the issue on February 17. The company will invite bids for between February 19 and 23.
The government had last year said that all listed profitmaking PSUs should have at least 10 per cent public holding. Disinvestment in select PSUs is likely to fetch Rs 30,000 crore to the government next fiscal.
REC's follow-on offer will be the second issue to employ the French Auction route of bidding wherein retail investors and High Networth Individuals (HNI) can bid at the floor price.
Up to 50 per cent of the issue will be allocated on a price priority basis to Qualified Institutional Buyers (QIBs). During allotment of shares, the highest bidder will get preference based on the bids placed by them.
The company said 15 per cent of the net issue will be available for allocation to non-institutional bidders, while 35 per cent has been earmarked for retail investors.
Shankar said as the Indian economy continues to grow, needs for power and power infrastructure are expected to grow substantially as well.
In order to address the power supply shortage in India and match the increasing demand for power, the substantial increases in generation capacity will require additional improved transmission and distribution systems, all of which require significant investment.
"We expect, that as a lending institution dedicated to the power sector, we would continue to play a significant role in financing power sector growth," Shankar said.
