Govt clears PowerGrid FPO; to divest 10% stake

The government on Thursday approved disinvestment in transmission firm PowerGrid Corporation through a follow-on public offer to raise about Rs 8,400 crore (Rs 84 billion).

The Cabinet Committee on Economic Affairs gave its nod to the 20 per cent follow-on offer by PowerGrid, an official statement said.

The company would issue 10 per cent fresh equity, while the Centre would divest 10 per cent of its stake in the public sector unit.

The government holds 86.36 per cent stake in PowerGrid. The offer comprises over 84 crore (84,17,68,246) equity shares of Rs 10 each constituting 20 per cent of existing paid-up capital.

At current market valuation, the FPO is likely to mop up about Rs 8,400 crore.

Besides disinvestment of the government stake, the fresh capital raising would be used for part funding investment requirement of about Rs 58,000 crore (Rs 580 billion) of the PSU.

The company had hit the capital market in October, 2007, with its maiden public offer and raise 10 per cent fresh equity and the government divested 5 per cent of its stake.

To raise Rs 40,000 crore (Rs 400 billion) from disinvestment during the current financial year, the government would sell stake in about 10 more PSUs, including IndianOil Coporation, Coal India, Steel Authority of India Limited, Rashtriya Ispat Nigam Limited and Shipping Corporation.

The company targets to augment transmission capacity to 23,400 MW in the current fiscal from 19,800 MW at present.

The shares of PowerGrid were trading 1.75 per cent higher at Rs 101.60 a piece on BSE in afternoon trade.