CESC Ltd, whose board meets on Friday to finalise accounts for 1997-98, is considering raising up to Rs 125 crore through the equity route. The funds are crucial to CESC, which spends between Rs 90-100 crore in capital expenditure every year.
The board will consider a move to offer, issue or allot either by way of a public issue or rights/private placement an aggregate sum not exceeding Rs 125 crore. Explaining the rationale behind the move, CESC managing director Sumantra Banerjee told Business Standard:"There is a limit to the amount we can raise by way of debt. Hence, the equity route is being looked at. But this is basically an omnibus resolution to ensure our entry into the market at the right time without having once again to convene a shareholders' meeting."
The company is expected to seek shareholder approval for this enabling resolution at the forthcoming AGM itself.
Banerjee pointed out that the exact manner and timing of the issue would be decided only after the crucial tariff and current fuel surcharge revisions come along for the ailing power utility, which knocked up a hefty Rs 129 crore loss for 1997-98.
A tariff revision is being urgently sought by CESC, which has already petitioned the Jyoti Basu government for it. Besides, the current fuel surcharge is also being seen by the company as hopelessly inadequate for it to sustain itself, despite a small increase which the state government recently allowed. While the current fuel surcharge revision sought by CESC was to the tune of 28 paise, the state government allowed it a mere 5 paise increase. "A 28 paise gap translates into a Rs 13 crore haemorrhage each month. With a 5 paise relief, this is only down to about Rs 10-11 crore a month. But we are still bleeding badly", Banerjee explained.
The CESC managing director also explained that the timing of the equity issue, in whichever form, would be dependent on how the equity markets reacted to the tariff revision, when it comes through. The stock price movement at the time would be critical to the issue, he said.
"It all depends on how the markets take it", Banerjee said. The CESC stock opened on the Calcutta Stock Exchange at Rs 29.15, hit a low of Rs 28.40, touched a high of Rs 29 and closed at Rs 28.85.
According to CESC circles, there is no certainty on when exactly the state government will consider its request and pass the order on revision of tariff and also the current fuel surcharge. Some sections believe the revision could come through by October.
