Bowing to pressure from its stakeholders, the board of Ratnagiri Gas and Power Pvt. Ltd (RGPPL) has rejected a proposal to tap capital markets for raising Rs1,000 crore in an initial public offering (IPO) during fiscal 2009, as well as a private placement for an additional Rs500 crore.
“The IPO proposal has been squashed,” said a senior board member of RGPPL, who did not want to be identified. “One does not go for an IPO to pay off debt.”
NTPC Ltd and GAIL (India) Ltd each hold a 28.33% stake in the company, the other large shareholders being the Maharashtra State Electricity Board, which owns 15%, and lender banks—IDBI Ltd, State Bank of India, ICICI Bank Ltd andCanara Bank.
Even as the bigger stakeholders in the company, such as NTPC and Gail, had previously denied plans to seek private investors for the 2,140MW project, R.K. Goel, chairman of RGPPL and also director, finance, at GAIL, had announced the company’s IPO and private placement plans, as reported by Mint on 12 March.
“In the first instance, the board of RGPPL will this month consider changing its character from a private company to a public limited one. We will take this proposal to the company’s board on20 March. The total equity capital base of RGPPL is Rs4,000 crore. Post-IPO, a private placement of Rs500 crore is possible, wherein the lenders to the power plant may convert their debt into equity,” Goel had said. Goel did not respond to calls made to his office and his cellphone.
“We have maintained that we will not allow any private sector participation in the project,” Sushil Kumar Shinde, Union power minister had said on 12 March.
RGPPL was originally promoted by Enron Corp. It ran into trouble soon after, as there was a change in state governments in Maharashtra. The new government, a coalition made up of the Bharatiya Janata Party and the Shiv Sena, questioned the high cost of power from the plant.
Even in its new avatar, the project has been mired in controversy over issues ranging from inadequate gas to faulty equipment.
This is not the first time the idea of private sector involvement in the project has been explored. Companies such as Reliance-Anil Dhirubhai Ambani Group and Mukesh Ambani’s Reliance Industries Ltd have shown interest in acquiring equity in RGPPL, before and after the idea was explored by an empowered group of ministers headed by external affairs minister Pranab Mukherjee.
Industry analysts believe it is the 1.2 million tonnes per annum (mtpa) liquefied natural gas (LNG) terminal at the project, which will be increased to 5mtpa by 2010, that has caught the attention of the private sector.
“There is no case of an IPO at this point. They are close to defaulting on the loans and there are no cash flows. The company should first establish cash flows and get gas for the project. Floating an IPO was a completely misplaced notion,” said a New Delhi-based analyst, who didn’t to be named.