Power Grid Corp. of India Ltd (PGCIL) plans to raise money through an initial public offering (IPO) gathered momentum, with the company appointing five independent directors to its board on 10 July, as required by Indian law.
“We have intimated Securities and Exchange Board of India (Sebi, the stock market regulator) about the appointments and are waiting now for their observations. We expect them to respond shortly,” said J. Sridharan, director, finance, PGCIL.
The company’s share sale was to kick off in June, but was delayed as it did not have the requisite number of independent directors on its board as stipulated under Clause 49 of the listing agreement between publicly-listed companies and stock exchanges. National Hydroelectric Power Corp. (NHPC) is another government-owned company whose IPO has been delayed for a similar reason.
According to the clause, half of the directors on the board of listed companies have to be independent, that is, not employees of the company and not from entities that have any relationships with the company. The requirement was five for PGCIL, seven for NHPC.
PGCIL will raise an undisclosed sum through the issue of 382 million shares to the public. The government will also offload 191 million shares, thereby reducing its holding in PGCIL to 86.36%. The government is piggybacking on the IPO to divest a 5 per cent stake in PGCIL.
“India needs huge transmission capacities to transfer power from surplus areas to deficit areas. It is PGCIL’s job. The resources raised through the IPO will help it strengthen its transmission network and help the proposed power trading exchange,” said Bhavesh Shah, head of research, Asit C. Mehta Investment Intermediaries Ltd.
The merchant bankers for the issue are Enam, CitiBank and Kotak Mahindra.
The NHPC board is yet to appoint the required independent directors. “We are in the process of appointing independent directors on our board and are hopeful that it will be done soon,” said S.K. Garg, chairman and managing director, NHPC.
NHPC plans fresh sales of shares amounting to around 10% of its authorised share capital of Rs15,000 crore. The government, which currently holds 100% equity in it, will sell 5 per cent of its holding to the public. After the IPO, the government’s stake in NHPC will come down to 86.30%.