No change in Rural Electrification Corporation IPO schedule, price band

AHMEDABAD: Exuding confidence about its strong fundamentals and bright prospects of the power infrastructure sector, state-run Rural Electrification Corporation has declared that there is no change in its IPO schedule or in its price band.
“We are not unduly worried over the failure of some other IPOs since we are confident that our issue is competitively priced,” said Mr Anil Lakhina, CMD of REC at a Press Conference here. “India has become a hot bed for investment in power sector,” he said and pointed out that close to 20% of the investment of Rs ten lakh crores in power sector in the 11th plan period will be done by REC alone.” He said.
He also sought to dispel the feeling in certain quarters that REC stands for electrifying only villages. “We are a diversified power infrastructure company and are not subsidized. We are a profit making company and have a consistent track record of performance winning the excellent ratings from the government consistently for 13 years from 1994.” he said.
REC’s loan sanctions and disbursements have grown at a CAGR of 28.37% and 13.51% respectively between Fiscal 2003 and 2007. Its loan sanctions amounted to Rs 329,254 million and disbursements Rs 107,328 million. Its PAT has grown at a CAGR of 8.92% from Rs 4,854 million in Fiscal 2003 to Rs 6,831 million in Fiscal 2007.
The size of REC’s business can gauged from the fact that its loan asset has grown at a CAGR of 18.35% from Rs 159,357 in FY ’03 to Rs 312,622 in FY ’07. As on March 31, 2007 REC had total assets of Rs 362,034 million net worth of Rs 38,070 million.
REC’s IPO will open on February 19, 2008 and close on February 22, 2008. Its price band has been fixed at Rs 80-Rs105 per equity share of Rs 10 each. The company is coming out with a public issue of 156,120,000 Equity Shares of Rs. 10 each through 100% book building process. The Issue comprises a fresh issue of up to 78,060,000 Equity shares by REC and an offer for sale of up to 78,060,000 Equity Shares by the President of India acting through the Ministry of Power. The net issue to the public will be up to 152,217,000 Equity Shares, after allowing for reservation of up to 3,903,000 Equity Shares for subscription by eligible employees as defined in the Red Herring Prospectus.
The Issue shall constitute approximately 18.18% of the fully diluted post-issue capital of REC IL & FS Investsmart Securities Limited, ICICI Securities Limited and SBI Capital Markets Limited. are the Book Running Lead Managers for the Issue. The Equity Shares are proposed to be listed on the NSE and the BSE.
The Company proposes to utilize the net proceeds from the Fresh Issue to augment its capital base to meet the future capital requirements arising out of growth in its assets, primarily its loan and investment portfolio due to the growth of the Indian economy and for other general corporate purposes including meeting the expenses of the Issue. The Company is seeking to strengthen its capital base to improve its borrowing capacity in order to support the future growth in its assets.
REC is one of the leading public financial institutions in Indian power infrastructure, engaged in the financing and promotion of transmission, distribution and generation projects throughout India. It occupies a key position in the GoI’s plans for the growth of the Indian power sector. Since its inception in 1969, the Company’s mandate has evolved to permit it to finance all segments of the power sector throughout the country. It provides funding to clients and assists them in formulating and implementing various types of power project-related schemes. Its clients include public sector power utilities at the central and state levels and private sector power utilities. Additionally, it finances power projects for its joint sector clients. It aims to capitalize on the increasing private sector participation in the Indian power sector. The Company occupies a unique position within the area of rural electrification of India and it currently administer grants and provide loans as the nodal agency for the RGGVY, which is primarily aimed at the electrification of all villages in India. As a public sector undertaking, it has been accorded “Mini Ratna Grade-I” status by the GoI by virtue of its operational efficiency and financial strength, which affords greater operational freedom and autonomy in decision-making. In recognition of its performance and consistent achievement of targets negotiated under the memoranda of understanding that it enter into with the GoI on an annual basis, the GoI has rated its performance as “Excellent” continuously from Fiscal 1994 through Fiscal 2007. REC has also been ranked among the top ten public sector undertakings in India by the Ministry of Heavy Industries and Public Enterprises for Fiscal 2000, Fiscal 2002 and Fiscal 2005.Domestically, it holds long-term borrowing ratings of “AAA”/Stable from CRISIL Limited, “LAAA” from ICRA Limited and “AAA(ind)” from Fitch, each of which is the highest long-term domestic rating of the respective agency. On an international basis, the Company holds long-term borrowing ratings of “BBB-” and “Baa3” from Fitch and Moody’s, respectively, which are on par with sovereign ratings for India. The President of India, acting through nominees from the MoP, currently holds 100% of the issued and paid up equity capital of our Company. After the Issue, the GoI’s shareholding will be 81.82% of the diluted post issue paid up equity capital of our Company. The GoI, acting through the MoP, oversees our operations and has power to appoint Directors to our Board.