Apply : Rural Electrification IPO

Thebullishtrends: Rural Electrification Corporation (RECL) is a leading financial institution financing Indian power infrastructure sector. RECL came to IPO market on 19th February'08 with a public issue of 15,61,21,000 equity shares worth of Rs.10 face value each with a price band of Rs.90-105. IPO closes today.

The company had last year floated a wholly-owned subsidiary - REC Power Distribution Company Ltd (RPDCL) - to promote and develop distribution systems. However, the subsidiary is proposed to be converted into a joint venture to enable REC diversify its range of offerings.
NEW DELHI: Prime lender to the power sector Rural Electrification Corp, which will hit the capital market with a public issue this week, is seeking to partner an infrastructure firm to enter electricity distribution segment. The company had last year floated a wholly-owned subsidiary - REC Power Distribution Company Ltd (RPDCL) - to promote and develop distribution systems. However, the subsidiary is proposed to be converted into a joint venture to enable REC diversify its range of offerings.

RPDCL is considering conversion of its status from a wholly-owned subsidiary into a joint venture company with another infrastructure and finance company and its affiliates to increase the scope of its activities including setting up of decentralised distribution generation going. The authorised share capital of RPDCL is also proposed to be raised to Rs 1,000 crore from the present Rs 20 crore. The proposals are subject to approval of shareholders of REC, RPDCL and the Power Ministry.

REC is one of the two leading public financial institutions in Indian power sector. REC and state-run Power Finance Corp provide financing and consulting services for development of power projects in the country. Its arm RPDCL has been appointed as the nodal agency by Punjab State Electricity Board for selecting a developer for a proposed 1,800 MW power project. The company will get Rs 12.5 crore for this assignment.

RPDCL has also entered into an agreement with Jodhpur Vitran Nigam Ltd for supervision and inspection of village electrification work under the Rajiv Gandhi Grameen Vidyuthikaran Yojana (RGGVY). In FY07, RECL has registered 75 per cent growth in loan sanctions. Disbursements around Rs 13,700 crore, recording the highest ever year on year growth of 71 per cent.

The disbursements were primarily towards transmission & distribution and generation projects. Going forward, continued support and extension of favourable policy regime by the government, increased competition from banks and other financial institutions and REC’s ability to maintain asset quality would be the key rating sensitivities.

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