It expects to generate Rs40 billion from its planned follow-on public offer; admits that a few of its urban projects have been held up due to resistance from locals
Power Grid Corporation of India Ltd, the government-run entity which controls nearly 95% of India's inter-state and inter-regional electrical transmission systems, plans a follow-on public offering (FPO) of 841,768,246 shares at a price band Rs85 (lower)-Rs90 (higher) per share. However, the scrip fell 3.85% to touch Rs98.35 on the Bombay Stock Exchange, and is now at the point that it was three years back.
Retail investors and eligible employees will get 5% discount on the issue price on allotment. The bid period will close for qualified institutional buyers on 11th November, while for the other bidders the closure will be on 12th November. The minimum bid lot has been fixed at 65 equity shares, said the company.
The company is expecting to raise Rs40 billion from the FPO which it plans to use to fund nine transmission corridors. The total project cost for these corridors is pegged at Rs586 billion.
The company also has capex plans of Rs1.2 lakh crore under the XII Five Year Plan (ending March 2017), according to SK Chaturvedi, chairman and managing director, Power Grid.
However, a few of the company's projects in urban areas have been delayed due to local resistance against setting up electrical transmission towers.
"Power Grid is facing some problems in setting up towers in urban areas from local people," admitted Mr Chaturvedi. "But the central and state governments are tackling the issue amicably."
On the delays in projects along the western corridor, Mr Chaturvedi said, "In the western corridor, the projects were delayed due to two reasons- construction of sub-stations and construction of lines. However, our part of construction of the sub-stations was going smoothly, while (the) clients were behind schedule, so the projects got delayed."
For the XI Five Year Plan, the company's capex was Rs550 billion, of which Power Grid has spent Rs250 billion so far and Rs300 billion will be spent over the next two years, said Mr Chaturvedi.
Divestment secretary Sumit Bose, who was also present at the Mumbai conference for declaring Power Grid's FPO details, chalked out the Centre's divestment programmes for various public sector undertakings (PSUs).
"For the calendar year, we will bring (out) FPOs of Shipping Corporation of India and Hindustan Copper Limited and an IPO for Manganese Ore India Ltd-while for the next calendar year, Indian Oil Corporation Limited and SAIL will be on the cards," said Mr Bose.
The company is looking at boosting its profits by leasing its electricity transmission towers to telecom companies for setting up their networks.
"We have invited bids from telecom companies for setting up their networks on our towers and 15th November is the last date for the bidding," said IS Jha, director (Projects), Power Grid. However, he declined to comment on the amount that the company plans to generate from these bids.
In September 2007, the company's initial public offering raised Rs29.8 billion.
Fund companies are now becoming increasingly vocal about the maelstrom unleashed by SEBI’s regulatory moves. But do they need to look at their own actions and flawed business models too?
After putting up a brave face for most part of the year about the market regulator's frequent changes, fund companies are slowly but surely exhibiting frustration. While the steady erosion in the corpus of mutual funds has caused some discomfort among asset management companies (AMCs), the recent sharp decline in profits seem to be the tipping point for fund companies. The Mint, which has been an unstinted champion of regulatory actions, naively arguing that they were pro-investor, has now started to voice concerns of the fund companies about the regulator's actions.
Till only a few months ago, AMCs were strangely silent about the whirlwind regulatory changes introduced by the Securities and Exchange Board of India (SEBI). Despite the turmoil that they experienced, AMCs agreed that they would be able to "adjust" to the changes. Now, fund companies are becoming vocal in their criticism of the regulator's actions. SEBI, meanwhile, thinks that companies are coping well with the regulations.
Faced with a sharp reduction in profits amid continuing haemorrhaging of assets under management (AUM), AMCs are not willing to suffer silently any more. Equity mutual funds have witnessed an outflow of Rs29,000 crore so far in this calendar year. Since the ban on entry load imposed by SEBI last August, the total outflow has touched a whopping Rs38,500 crore.
However, this drain was not reflected in the financial results of fund companies for the year ended March 2010. This was because of the phenomenal surge in stock markets that got transferred on to the balance sheet and income statements of the companies. The resulting inflation in the value of AUMs was responsible for the companies showing healthy profits in their books for the last year, since fund companies make a percentage of AUMs. Now however, the story is quite different. The Mint report points out that several AMCs have reported a sharp decline in profits, with some like ICICI Prudential Asset Management Co and Kotak Mahindra Asset Management Co even posting losses for the quarter ended September 2010.
Naturally, AMCs are a worried lot. But while they are fair in their criticism of SEBI's mostly ill-conceived and ill-timed initiatives over the last year, the fact remains that AMCs had it coming for a long time. Among the chief reasons that prompted SEBI to put an end to the entry-load mechanism in mutual funds was the past excesses of fund companies. The boom period between 2005 and 2007 saw AMCs churn out new fund offers (NFOs) at a frenetic pace in a bid to capture volumes and generate more and more AUMs. This came at the expense of product and service quality.
Fund companies were actively encouraging distributors to advise investors to sell their existing funds and subscribe to NFOs. They shamelessly enticed investors with the logic that NFOs were priced at Rs10-supposedly much cheaper than existing units-when actually the issue price of NFOs is meaningless. In order to incentivise distributors to sell these NFOs, funds plied them with lavish gifts and even took them on foreign trips.
Another self-inflicting factor for AMCs has been their flawed business model. The way it is structured is that fund companies are practically at the mercy of distributors to sell their products for them. With little retail contact base of their own, these AMCs are dependent on selling skills of distributors to generate revenues. With SEBI now having dealt a telling blow to the distributor community by taking out their commissions, AMCs are suddenly left without any muscle.
Obviously, fund companies now have to substantially alter their business models to suit the altered landscape of the industry. Otherwise, a wave of consolidation of sorts could very well be on the cards.
New Delhi: India and the US are considering setting up a $10 billion infrastructure debt fund under the public-private-partnership mode to expedite investments in the infrastructure sector, reports PTI quoting commerce and industry minister Anand Sharma.
The debt fund has been mooted by the India-US CEOs Forum that comprises 12 corporate leaders from each side and it could help India get resources to finance its USD 514 billion infrastructure investment plans.
"Both the governments will consider the recommendation...
It is India-US infrastructure debt fund proposed by the CEO's Forum of $10 billion," Mr Sharma told reporters on the sidelines of a Confederation of Indian Industry (CII) meet here.
"Finance minister (Pranab Mukherjee) and US Treasury secretary (Timothy Geithner) are directly discussing what modalities should be adopted to put in place the infrastructure debt fund," he added.
However, Mr Sharma added that details of the proposed fund would be known after the two countries take a final call on it without a specifying timeline.
"The governments have yet to take a final view and put the modalities in place. In principle it has been agreed that the governments will be fully supportive of the recommendation," Mr Sharma said.
The fund would be operated on the public-private partnership (PPP) mode and it would help in meeting the country's funding gap in the infrastructure sector, he said.
The India-US CEOs Forum is co-chaired by Tata Group chief Ratan Tata and head of Honeywell Corporation Dave Cote. The Indian CEOs include ICICI Bank CEO and MD Chanda Kochhar, Bharti group chief Sunil Bharti Mittal, HDFC chief Deepak Parekh and State Bank of India chairman O P Bhatt.
The US is represented by the likes of McGraw Hill of Companies chief Terry McGraw, PepsiCo CEO Indra Nooyi and Citigroup CEO Vikram Pandit, among others.
India has emerged as an attractive global investment destination as its infrastructure sector alone requires investment of $514 billion for the 11th Plan (2007-08 to 2011-12). Almost 30% of this investment is envisaged to come from private sources.
For the 12th Five-Year Plan (2012-13 to 2016-17), the investment in infrastructure is envisaged at $1 trillion.
Earlier in the day, Mr Mukherjee had said that this magnitude of investment would require innovative modes of financing.