The Hindu : New Delhi News : Three power PSUs allowed to tap capital market

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Saturday, Nov 25, 2006
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New Delhi

Three power PSUs allowed to tap capital market

Special Correspondent

NEW DELHI: The Union Cabinet's Committee on Economic Affairs has approved the Power Ministry's proposal to allow its three public sector undertakings to come out with IPOs (initial public offerings) to raise money from the market to meet their additional capital requirements.

The Power Grid Corporation would come out with an IPO not exceeding 24 per cent of its paid-up capital. The IPO would be issued in tranches. The first tranche would be for10 per cent of its paid-up capital.

The Power Finance Corporation would, in turn, come out with an IPO amounting to 10.22 per cent of its post-issue capital equivalent to 11,73,16,700 equity shares. The Rural Electrification Company's IPO would amount to 20 per cent of its paid-up capital equivalent to 15.6 crore shares.

Announcing the decision, Finance Minister and CCEA spokesperson, P. Chidambaram, said the Power Ministry would decide the timing of the issue of the IPOs. It would probably be in the fourth quarter of the current fiscal. An inter-ministerial group would work out details of the IPOs.

Asked whether the Government took the Left concurrence, he said the decision was consistent with the National Common Minimum Programme. It clearly provided for PSUs accessing the market to raise additional capital.

The U.S-based Hilton International Company would be allowed to invest 26 per cent equity amounting to $143 million (Rs. 643 crore) in a joint venture firm for developing a chain of hotels and service apartments and to set up a wholly owned subsidiary involving an investment of $28.8 million (Rs. 130 crore) for operation and maintenance of its hotels here.

The CCEA also cleared a proposal of Urban Infrastructure Venture Capital Limited to raise capital up to Rs. 2,300 crore from non-resident Indians and other foreign investors for its second Urban Infrastructure Opportunities Fund (UIOF- II) with a greenshoe option of Rs.460 crore for NRIs and foreign investors.

The total inflow of foreign investment as a result of the transaction will be up to Rs. 2,484 crore.

The meeting approved the proposal by Peninsula Realty Fund, Mumbai, to allow overseas investors to invest through a special purpose company in units to be issued for investment in FDI-compliant projects of the Fund up to Rs. 1,596 crore.

Chaired by Prime Minister Manmohan Singh, the CCEA decided to allow the development of 603 km of national highways in the northeast on a BOT annuity basis. There were no takers for earlier bids on a BOT toll basis.

The Cabinet decided to extend to cooperative banks the subvention provided to public sector banks, regional rural banks, and the National Bank for Agriculture and Rural Development to enable them to provide short-term loans at seven per cent interest to farmers.

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