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Last Updated : Dec 06, 2018 10:53 PM IST | Source: PTI

Cabinet approves sale of govt stake in REC to PFC, agriculture export policy

The government held 57.99 percent stake in REC, and 65.64 percent in PFC at September-end.

 
 
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In the second merger of public sector undertakings under this government, the Cabinet Committee on Economic Affairs (CCEA) on Thursday approved sale of the government's 52.63 percent stake in REC Ltd to Power Finance Corporation for an estimated Rs 15,000 crore.

"The CCEA gave in principle approval for strategic sale of the Government of India's existing 52.63 percent of total paid up equity shareholding in REC Ltd to Power Finance Corporation along with transfer of management control," Finance Minister Arun Jaitley said at a press conference after the Cabinet meeting here.

The government held 57.99 percent stake in REC, and 65.64 percent in PFC at September-end.

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However, the government holding in REC came down to 52.63 percent following stake sale through ETF.

Jaitley also said he had talked about the merger of public sector undertakings working in the same space in the budget for 2017-18.

In his budget speech, he had said there were opportunities to strengthen CPSEs through consolidation, mergers and acquisitions.

"By these methods, CPSEs can be integrated across the value chain of an industry. It will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for the stakeholders," he had said.

Later Thursday, an official statement said the REC-PFC deal intends to achieve integration across the power chain, obtain better synergies, create economies of scale and enhance capability to support energy access and energy efficiency by improved capability to finance the power sector.

It may also allow for cheaper fundraising with increase in bargaining power for the combined entity.

Both REC and PFC are Central Public Sector Enterprises (CPSEs) under the Ministry of Power.

Earlier, the government had planned to sell its entire 65.64 percent stake in PFC to REC for around Rs 16,500 crore, along with transferring management control.

Sources said the plan was changed earlier this week in view of certain suggestions given by ministries, particularly the Power Ministry.

At the end of 2017-18, the total resources of REC stood at over Rs 2.46 lakh crore, of which reserves were Rs 33,515.59 crore. The net worth of the company was Rs 35,490 crore and 'cash and bank balance' was Rs 1,773 crore at the end of March 2018.

PFC's 'reserves and surplus' stood at Rs 37,221 crore, and 'cash and bank balance' were Rs 4,600 crore at the end of March 2018.

The deal will help the government scale up its disinvestment proceeds. So far, over Rs 32,000 crore has come into the disinvestment kitty from minority share sale in CPSEs and follow on offer of exchange-traded funds -- CPSE ETF and Bharat-22.

The budgeted target for PSU disinvestment is Rs 80,000 crore.

Earlier, the government bagged Rs 36,915 crore from the sale of its entire 51.11 percent stake in oil refiner HPCL to ONGC in 2017-18.

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First Published on Dec 6, 2018 09:17 pm
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