AP to dilute 49% in state finance corp

HYDERABAD: The state government is planning to dilute up to 49% equity stake in Andhra Pradesh State Financial Corporation (APSFC), a term lending institution for promoting small and medium scale industries. The proposed dilution will be through an IPO to be launched by the corporation in 2009. Currently, the state government holds 100% stake in SFC, which was formed in 1956 through the merger of Andhra State Financial Corporation and Hyderabad State Financial Corporation.

“Crisil is in the process of rating the corporation and the exercise will be completed by mid-next year. This will be followed by a valuation of the enterprise by one of the rating agencies. The money raised through the proposed IPO will be used to increase our portfolio of advances portfolio,” said APSFC MD A Giridhar.

Some of the other SFCs, such as Gujarat State Finance Corporation, are already listed on bourses. APSFC is targeting to raise its asset base from Rs 1,300 crore to Rs 3,000 crore ($1 billion) this fiscal. Of this, Rs 750 crore would be raised through non-SLR bonds next fiscal. Non-SLR bonds are bonds that do not fall in the SLR basket. Normally, non-SLR bonds have a lock-in period of 7-8 years. Earlier this year, SFC raised Rs 50 crore through the issuance of non-SLR bonds, carrying a coupon rate of 9.10%.

APSFC on Monday announced a tie-up with United India Insurance. Under this arrangement, the insurance company will provide covers to all borrowers of APSFC, said UIC deputy general manager K Sanath Kumar. The state government has allotted around 270 acres to the corporation near Hyderabad to develop an industrial park for small and medium enterprises.