REC's FPO to hit markets on Feb 19 to Feb 23

By ENN, Ahmedabad: Public power financing entity, Rural Electrification Corporation (REC) today announced it will offer 17.174 crore equity as Further Public Offering (FPO) through Alternative Book Building method.

The offer will open on February 19-23.

The FPO will consist of a fresh issue of 12.87 crore equity and 4.2 crore equity shares by Ministry of Power. The company floor price will be announced on February 17.

The offering will follow the French auction whereby, REC will announces a minimum (reserve) price. Investors will place sealed bids for quantity and price. Bidders who bid between the minimum and maximum price are awarded shares on a pro rata basis, each paying the minimum price. The FPO will constitute 17.39 per cent of REC's fully diluted post-issue capital.

Out of the proceeds, the Government of India is will keep one-fourth, while REC will keep two-thirds. REC will utilize its share of proceeds to augment its capital requirements, enhance REC branding and raise value of its equity. Funds from the FPO will also be used to increase REC's capacity to borrow, top officials said today.

'' To maintain India's growth at eight-nine per cent in the future, the power requirement has been estimated at 66,000-69,000 GW. The power sector's growth is nine-ten per cent and REC's market share is more than 20 per cent.

Funds in the 11th Five Year plan is estimated at Rs ten lakh crores and Rs 11 lakh for the 12th Five-Year Plan, '' stated company's, Chief Managing Director (CMD) P Uma Shankar.

The company currently has two lines of credit via German government development bank KFW and Japan Bank for International Cooperation (JBIC) totalling USD 800 million. It is currently holding talks with Asian Development Bank (ADB) for a USD 250 million credit line.

'' We are a almost zero debt company with a diversified portfolio. The top ten entities financed by us account for only 45 per cent of our loans and no single entity accounts for more than 13 per cent of our loans,'' said Shankar.

The company will continue its financing of power sector players with emphasis on generation over Transmission and Distribution (T and D) segment. The company will also take up projects on non-conventional energy sector including biogas, hydel and wind power depending on application and proposals received. Preference will be given to solar energy with differential tariffs, said Shankar.

Book Running Lead Managers (BRLM) for the FPO are Kotak Mahindra Capital, DSP Merrill Lynch, ICICI Securities, JM Financial Consultants and RBS Equities.