Public offer would enable power PSUs to expand biz

Disinvestment through stake sale to strategic partners might be on hold, but that does not prevent the government from offloading small pieces of PSU equities in the market through the initial public offer (IPO) route. The Cabinet has recently given the go-ahead for four initial public offerings from four power sector PSUs. The Left parties, whose resistance had prompted the prime minister to put the grander disinvestment plans in abeyance, maintained a stoic silence on the plan. As for the power PSUs, the money to be raised through the public offers of equity could enable the power sector companies to fund their major expansion programmes on the cards. Union power secretary R V Shahi tells Urmi A Goswami why the IPO route would suit the power companies and reveals his plans to nudge a clutch of other companies also to tap the capital market.

Why this rush to tap capital market by power sector companies?

The instrument (of IPOs) would bolster then net worth of these companies which will in turn make them capable of large capital investments. All of them have major expansion plans. Exposure to the capital market would enhance the sense of responsibility to these PSUs, and their governance systems and management capability will eventually improve. After the IPOs, it would be natural for them to come to know of many areas of concern through research associates and shareholders. This could be useful for addressing concerns and improving performance. The ministry of power has plans to cover all operative companies under its administrative control under the IPO scheme.

Now that the Cabinet has approved four IPOs, how soon do you propose to access the market?

The ministry has planned that after the success of the initial public offering of PTC and NTPC, other companies such as Power Finance Corporation, Rural Electrification Corporation (REC), PowerGrid Corporation, National Hydro-electric Power Corporation (NHPC) and North Easter Electric Power Corporation (NEEPCO) should also be brought into the the equity capital market.

The first lot of companies, that is PFC, PGCIL, REC and NHPC, has been approved by the Cabinet Committee for Economic Affairs. Power Finance Corporation has done its preparatory work over the last one year. It will be the first to get into the IPO subscription, may be in the next two months or so. PowerGrid, REC, and NHPC will require to undertake some preparatory work. These companies will make the necessary efforts to complete the required activities, so that they can access market in this fiscal on a best effort basis.

Which are the other companies lined up to access the market?

North Eastern Electric Power Corporation (NEEPCO) will also be accessing the market soon. It might take another four to six weeks for the proposal to materialise.

Why did the government give up on divestment to strategic partners?

Right from the beginning, the ministry was of the view that it would prefer the initial public offering route to divestment. The IPO option enables the flow of funds into the company for growth and expansion.


How do you expect the market to react?

Very positively, any organisation dealing with power is doing exceedingly well in the stock market in the last two to three years. PTC which is a relatively smaller company is doing exceedingly well, while NTPC has the third highest market cap among Indian companies.