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New Delhi, March 10: The government plans to ride piggyback on Power Finance Corporation’s (PFC’s) initial public offer (IPO) to offload 10% of its stake in the public sector company. This will be in addition to the 10% issue of shares by the company, taking the total offer size to a little under 20% of the post-issue equity.
While no clear indication on the timing and pricing of the issue is currently available, merchant bankers vying for the issue managers mandate have indicated an issue price band of Rs 80-150 a share in their presentations before PFC.
This would imply an issue size of about Rs 3,000 crore, of which the government would stand to rake in Rs 1,500 crore.
As per the proposed plan, PFC will issue 10.3 crore shares as fresh equity while the government will sell 10.3 crore shares in the offer to the public. PFC’s current equity capital of Rs 1,030 crore (103 crore shares of Rs 10 each) will expand to Rs 1,133 crore as a result of this plan and the government’s stake in the post-issue capital would decline to 81.8%.
PFC’s profit for 2003-04 stood at Rs 1,600 crore, implying an earnings per share (EPS) of Rs 15.5 on the pre-issue capital.
However, given a change in accounting policy with regard to recognition of income from a receipt to an accrual basis, the profits in 2004-05 are expected to be lower at around Rs 1,000-1,100 crore.
Consequently, earnings per share on the current equity base would also decline to around Rs 10.8 per share, indicating a discounting of a little under 14 times at a price of Rs 150 per share.
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