Government to divest 5% stake in PFC along with IPO
Divestment is back on the agenda with the government deciding to sell 5% stake in Power Finance Corporation (PFC) in tandem with its initial public offering (IPO) that would raise up to Rs 1,500 crore. “The government will ride piggyback on the PFC IPO to disinvest 5% stake. The Cabinet has approved the proposal,” power secretary RV Shahi said. The divestment is modelled around the NTPC offer, he added.
PFC is expected to hit the market in the next 3-4 months to float fresh equity of 10% through its maiden public issue of 10.3 crore new shares. Sources said the PSU can garner Rs 1,000 crore to Rs 1,500 crore in the process. PFC has a paid-up capital of Rs 1,030 crore. This translates to 10.3 crore new shares of Rs 10 face value each. The government’s part of disinvestment would be around 5.15 crore equity shares. At the outer limit, PFC could raise up to Rs 1,030 crore while government would collect Rs 515 crore as its share of disinvestment proceeds.
Having a book value of Rs 65 per share, the company could charge some premium over this amount, sources said, adding the issue could be priced in the range of Rs 70-100. The final price band as also the time when it hits the market would be decided in consultations with the merchant bankers, sources said.
The company posted a net profit of Rs 470 crore over a total income of Rs 1,563 crore for the first half this fiscal. During FY05, it had reported a net profit of Rs 984 crore over a total income of Rs 3,047 crore. pfc has reserves of Rs 5,350 crore while earnings per share (EPS) is Rs 4.56.
PFC, a non-banking finance company for the power sector, will only be the second public-sector power firm to get listed on the bourses after NTPC. The government had divested 5.25% stake in power giant NTPC during its public offer of an equal amount in ’04. PFC would only be the second government company for disinvestment after Maruti if it hits the market this fiscal.