Disregarding the noises made by Left allies, the government has allowed three premier state-owned power companies to dilute their stake by about 10 per cent.
On Thursday, the Cabinet Committee on Economic Affairs (CCEA) permitted the Power Grid Corporation of India Ltd (PGCIL), Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to go public.
The companies will raise additional equity worth 10 per cent of their paid-up capital from the stock market through initial public offers (IPOs). Their public issue will hit the market in last quarter of this financial year.
"This is not disinvestment. The power companies will raise additional equity from the market through IPOs. In the process, the government’s equity will get diluted," said Finance Minister P Chidambaram.
About the Left’s reservations, he said, "We have informed them at the last meeting of the Left-UPA Coordination Committee. As per the common minimum programme, the companies can go to public to raise funds."
The government will also add two more companies — the National Hydroelectric Power Corporation (NHPC) and North Eastern Electric Power Company (NEEPCO) — to the list that will go public this year.
The government proposes to sell 10 per cent of paid up capital in these two companies as well later this financial year. "We have already moved the final cabinet note with regards to NHPC. NEEPCO will be ready to go public in next two months," Power Secretary RV Shahi told Hindustan Times.
Following the CCEA decision, the PFC will file a fresh red herring prospectus with SEBI for the IPO. "We will rework the numbers in line with the government's decision to offer 10.22 per cent of post-issue capital," Dr VK Garg, Chairman and Managing Director of PFC, told HT.
With a book valuation of Rs 58 per share, the PFC is likely to mop up Rs 800 crore through the IPO. As for PGCIL, its valuation is being cited as anything between Rs 33 - 40 per share. The merchant bankers have yet to work out the book value for REC shares.
Though only 10 per cent of paid up equity is being raised through IPOs, the Power Ministry has secured approvals for raising additional equity.
With regards to PGCIL, the CCEA has authorised the Power Ministry to raise 24 per cent of paid up capital from the market in tranches. In case of REC, 20 per cent of paid up capital translating into 15.6 crore shares would be offered to the public. In PFC, the 11.70 crore shares on offer constitute 10.22 per cent of post-issue paid up capital.