Small BusinessREC, govt differ over fund-raising
Rural Electrification Corp Ltd (REC) is in favour of going in for a qualified institutional placement (QIP) of shares to raise funds, while its parent, the Government of India, wants the company to take the follow-on public issue route, an official familiar with the development told NewsWire18.
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“The company wants a QIP, as the process is much faster. The government thinks QIP may not be as transparent as an FPO, and it doesn’t want to be seen as playing favourites. Investment bankers play a significant role in determining who gets the equity in case of a QIP, something government may not be comfortable with,” the official said.
He also said a follow-on issue is as tedious as an initial public offering, requiring substantial resources in terms of time and money.
The government holds 81.82 per cent stake in the company, that has a total equity of 858.66 million shares.
The proposal from Rural Electrification to the finance ministry includes both options to raise funds — QIP and FPO.
The company seek to raise Rs 2,800-3,000 crore through issue of 170 million shares. At 1500 IST, shares of Rural Electrification traded at Rs 189.50 on the National Stock Exchange, up 3.4 per cent from close Wednesday.