Financial Daily from THE HINDU group of publications
Tuesday, Sep 03, 2002

News
Features
Stocks
Port Info
Archives

Group Sites

Corporate - IPOs
Markets - IPOs
Industry & Economy - Disinvestment
Money & Banking - Financial Institutions


Return Rs 600 cr to Govt ahead of public offer, PFC advised

Balaji C. Mouli

NEW DELHI, Sept. 2

J M Morgan Stanley, Power Finance Corporation's consultants, has advised the corporation to return around Rs 600 crore of equity to its owner, the Government, in order to make its initial public offering (IPO) plan of 10 per cent of the reduced equity base amounting to Rs 46 crore attractive to the investor.

The consultant's draft report, once finalised, will be forwarded to the Ministry of Power for its consent, company officials said. The IPO size is estimated to be Rs 160-200 crore, after factoring in the premium, which will be finally determined by a book-building process.

In a presentation made to the PFC board a few days ago, the consultants said, "Reduction in the equity capital improves the profitability ratios and would therefore enhance IPO valuations." PFC has an equity base of Rs 1,030 crore and the consultants have advised PFC to return 60 per cent of the capital amounting to Rs 618 crore.

According to the consultants, the objective of the IPO would be to "ensure visibility and create a benchmark for future capital market exercise when the markets are more conducive to fund raising."

As of now, the consultants have recommended a "minimum 10 per cent float in the domestic market for the IPO." Also, "listing at attractive volumes would ensure scope for capital appreciation to the public shareholders creating market goodwill."

"Such reduction (in capital) would not adversely impact the credit rating of PFC while enhancing its valuation and its ability to raise funds from the capital market," the consultants have argued.

The analysis has been arrived at after a comprehensive comparison was conducted with the financials of the Bank of Baroda, Bank of India, Punjab National Bank, Canara Bank and Corporation Bank.

In all these cases, while the equity capital ranges between Rs 294 crore and Rs 578 crore, PFC's equity capital is currently Rs 1,030 crore.

Consequently, while the earnings per share of the banks range from 10.35 to 21.54, the EPS of PFC is around 7.5.

Send this article to Friends by E-Mail

Stories in this Section
Lupin to foray into contract research


SEBI clears Precot buyback
Malegam for amending Cos Act
GSPL to sell pipeline for Rs 95 cr; sell-off not now — GSPC, Niko Resources close to ending row
VRS at Delhi Centaur gets good response
Bharat Forge to cut interest cost by retiring part of debt
A lesson in corporate virtue
Return Rs 600 cr to Govt ahead of public offer, PFC advised
Sony India targets Rs 750-cr turnover
Tata Engineering reviewing overseas biz
Bajaj Auto, Hero Honda Aug sales up
Honda Siel sales up 32% in Aug
ACC despatches up 24 pc in Aug


The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |

Copyright 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line