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The Cabinet on Thursday will consider the proposal for Power Finance Corporation Ltd. acquiring entire government holding in state-owned Rural Electrification Corporation Ltd. This will fetch the government around Rs 15,000 crore.
The government held 57.99 percent in REC, and 65.64 percent in PFC as of September-end. However, government holding in REC has come down to 52.63 percent following stake sale through exchange-traded fund.
"The proposal is PFC will acquire 52.63 percent government stake in REC, along with transfer of management control. A final call will be taken by (the) Cabinet on Thursday," a source said.
At the current market price of Rs 105.10 a share, sale of 52.63 percent government holding in REC will fetch around Rs 11,000 crore. The government will retain controlling premium and hence the deal value is coming at Rs 15,000 crore, the source said.
The government was initially considering to sell PFC to REC, however, on Wednesday the power ministry proposed PFC buying 52.63 percent government stake in REC. The government hopes that acquisition will create a larger entity with an enhanced balance sheet and provide higher value loans as well as remove duplication of work.
REC shares closed 1.22 percent down on the BSE, while PFC slipped 5.33 percent to Rs 92.30 apiece.
At the end of 2017-18, the total resources of REC stood at over Rs 2.46 lakh crore, of which reserves were Rs 33,515.59 crore. The net worth of the company was Rs 35,490 crore and 'cash and bank balance' was Rs 1,773 crore at the end of March 2018.
PFC's 'reserves and surplus' stood at Rs 37,221 crore, and 'cash and bank balance' stood at Rs 4,600 crore at the end of March 2018.
The deal, if it goes through, will help the government scale up its disinvestment proceeds. So far over Rs 32,000 crore has come into the disinvestment kitty from minority share sale in Central Public Sector Enterprises and follow on offer of exchange traded funds -- CPSE ETF and Bharat-22.
The budgeted target from public sector undertakings disinvestment is Rs 80,000 crore.
The REC-PFC deal is being considered on the lines of the acquisition of the government's entire 51.11 percent stake in oil refiner HPCL by state-owned ONGC in 2017-18. The government bagged Rs 36,915 crore from the stake sale.
Finance Minister Arun Jaitley had in the budget for 2017-18 said there were opportunities to strengthen CPSEs through consolidation, mergers and acquisitions.
"By these methods, CPSEs can be integrated across the value chain of an industry. It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders," he had said.
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