COMPANY LAW
| PFC may seek govt nod to raise fresh equity Mon, 02 Aug 2010 20:00:49 GMT |
| The Economic Times PFC may seek govt nod to raise fresh equity NEW DELHI: State-oned Power Finance Corporation is likely to ask the government not to sell stake in the company, and instead allow it to raise fresh equity to meet the regulatory capital requirements of its fast-expanding business. The public sector power financier may write a letter to the power ministry to seek a relaxation on grounds that divestment by government could affect its own equity raising plans. “We’re growing at 20% and above and accordingly we have additional capital requirements,” a company official told ET. Though no official proposal has been moved, the company is one of the many divestment options. Strong growth apart, recent changes in the rules have also increased the capital requirement for the company, in which the government holds a 89.78% stake having sold 10% through a public offer in 2007. PFC will have to maintain a 15% capital adequacy ratio, the minimum amount of capital it needs to hold in relation to its advances, as per the RBI’s norm for the newly created category of infrastructure finance companies. Earlier, as a plain vanilla state-owned non-banking finance company, PFC needed to maintain a lower CAR at 10% of total advances. The new status, however, allows PFC more flexibility in lending to private power project developers and also mobilise funds through infrastructure bonds. “If we raise money through fresh issues, the government stake automatically goes down and in case of any further divestment, it may go below 51% in a short duration,” the official said, adding that the government may then have to provide re-capitalisation support in order to maintain the public sector nature of PFC. At the end of June 2010, the company had a capital adequacy ratio of 17.38%, but this cushion could be easily exhausted given that it hopes to disburse `28,000 crore in the current fiscal against `25,800 crore lent last year. PFC CMD Satnam Singh agreed with the the need to recapitalise the company through a market offering within a period of one year. “Our board will soon consider the issue and sent the proposal to the government,” he said without elaborating on any other issue. An official of the power ministry agreed that PFC’s concerns on disinvestment were genuine saying that the company was already giving back cash to the government through a hefty 40-45% dividend annually. The disbursements of the company grew 87% in the April-June quarter of this fiscal to Rs 8,128 crore from Rs 4,345 crore in the same period last year. As on June 30, 2010, the cumulative sanctions stood at Rs 288,932 crore and cumulative disbursements at Rs 147,056 crore. The pace of lending is expected to pick up further as several private and public sector power projects are likely to come up in the next two to three years. PFC is a non-banking financial institution that provides loans for various power projects in generation, transmission, distribution sector as well as for renovation and modernisation of existing power projects. The current market capitalisation of the company is Rs 37,349.41 crore as on August 2, 2010. |
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