Divestment hiccups may delay PFC IPO

The government's decision to put disinvestment on hold may delay Power Finance Corporation's plans to raise fresh capital from the market within its original timeline of July-end.

The company's Draft Red Herring Prospectus (DHRP), filed with the capital market regulator, stands negated since the government wanted to simultaneously offload 5 per cent of its existing equity stake in the company along with a public equity issue of 10 per cent of its expanded capital base.

"Since the information in the DRHP is no longer relevant, PFC would have to file afresh if it wants to go ahead with its public issue. A public issue by PFC can only be revived if the power ministry routes a relevant proposal through the Cabinet Committee of Economic Affairs (CCEA)," a finance ministry official said.

Towards the end of last week, Finance Minister P Chidambaram said the government's decision to put disinvestment plans on hold would not affect public issues planned by state-owned companies.

Along with PFC, other state-owned power sector companies planned public equity issues this year to support their business operations. Power Grid Corporation, Rural Electrification Corporation and National Hydroelectric Power Corporation were among the companies that plan to raise capital through a public issue.

PFC and National Mineral Development Corporation (NMDC) were meant to be the vehicles through which the government could raise resources through disinvesment.

The Receipts Budget 2006-07 statement budgeted for receipts of Rs 3,840 crore through a partial disinvestment of shares in PFC and National Mineral Development Corporation. The budgeted receipts are based on the book values of the two companies on March 31, 2005.

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