The Power Finance Corporation (PFC) plans to pay Rs 14,500 crore to the Government of India on March 28 to close the takeover of the majority stake in REC. The power sector-lender would buy REC’s 103.94 crore equity shares at a Rs 139.5 per share —or 1.1% lower than the latter’s closing price on Friday.
Apart from making a major contribution to the Centre’s disinvestment kitty set for the year, the transaction would pave the way for PFC to become a promoter and the holding company of REC. The Cabinet Committee on Economic Affairs, on December 6, 2018, had approved the strategic sale of the government’s 52.63% of the paid-up equity shareholding of REC to PFC, along with transfer of management control.
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“The funds for the same have been arranged by PFC already,” the company said in a statement. PFC’s board in February had approved to raise its FY19 market borrowing limit to Rs 97, 000 crore — 70% higher than the limit set in the beginning of the fiscal. The limit under long-term rupee-denominated borrowing for FY19 has been increased to Rs 67,000 crore from Rs 20,750 crore fixed earlier.
REC has paid Rs 1,143.34 crore as interim dividend for FY19 to the government.
Global rating agency Moody’s had earlier said that it would ‘review for downgrade’ PFC’s standalone credit profile by focusing on the extent of decline in the post-transaction consolidated capital ratios of PFC. In Icra’s opinion, the proposed acquisition by PFC is likely to impact its capitalisation profile adversely.