New Delhi, March 28
State-owned Power Finance Corporation (PFC) today completed acquisition of majority stake in Rural Electrification Corporation (REC) Ltd by transferring Rs 14,500 crore to the government and is hopeful of merger of the two firms in 2019-20.
The transaction assumed significance because it helped the government meet its disinvestment target of Rs 80,000 crore for the current financial year.
“We are hopeful about merger of the two firms (PFC and REC) during 2019-20. We have to get direction from the government in this regard and then we would appoint consultant for the purpose,” PFC chairman and managing director Rajeev Sharma said.
This stake acquisition was in pursuance to the in-principle approval from the Cabinet Committee on Economic Affairs for strategic sale of 52.63% of paid-up equity shareholding of REC held by the government to PFC, along with the transfer of management control.
Sharma further said, “In line with the agreement, REC acquisition transaction by PFC got concluded today (Thursday) with release of payment to the government and transfer of REC shares to PFC. Now, PFC will be the holding company of REC and also its promoter.” PFC has acquired 103.94 crore shares constituting 52.63% equity stake held by the government in REC along with the management control at a cash purchase consideration of Rs 14,500 crore. The acquisition price of REC per equity share worked out to Rs 139.50 per piece. PFC has financed 70% of the deal from the cash inflows from the business and the balance 30% is through debt.
PFC Director (Finance) NB Gupta said the company was in discussion with Bank of Baroda, Life Insurance Corporation and State Bank of India, among others, to raise money for the deal.
Gupta said, “It would be difficult to tell who have financed this deal. We had a pool of funds raised through different modes and investors. There was a lot of funds availability in the market at competitive rates.” — PTI
Govt meets divestment target
- The transaction has helped the government meet its disinvestment target of Rs 80,000 crore for the current fiscal
- The government’s 52.63% equity in REC would be transferred in the name of the PFC
- PFC has raised money from Bank of Baroda, Life Insurance Corporation and State Bank of India, among others, to make the payment
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