The Reserve Bank had asked REC, a non-banking finance company, to take FIPB's nod for the portion which would come from non-residents.
NEW DELHI: State-run Rural Electrification Corporation has received approval from the Foreign Investment Promotion Board for its proposed Rs 1,200 crore public offerand is awaiting government clearance to appoint independent directors on its Board before hitting the capital market.
"FIPB has cleared the IPO at a recent meeting," official sources told.
Generally, companies do not need clearance from the Foreign Investment Promotion Board for initial public offers. However, the Reserve Bank had asked REC, a non-banking finance company, to take FIPB's nod for the portion which would come from non-residents.
RBI had directed the company to seek FIPB clearance for investment from non-residents, including NRIs, FIIs, foreign venture capital investors, multilateral and bilateral development financial institutions, according to REC's draft IPO prospectus filed with market regulator SEBI.
The power financing institution is yet to fulfil Clause 49 of listing agreement of SEBI, which mandates it to have 50 per cent independent directors on its board. REC currently has five directors, including three company executives and two government nominees. As per Clause 49, it should have five independent directors as well.
"We are waiting for the government to appoint the required numbers of independent directors. The IPO would hit the market in about one-and-a-half months of the appointment," a company source said.
REC expects to raise up to Rs 1,200 crore from the IPO comprising fresh issue of 10 per cent or up to 7.8 crore shares and an offer for sale by the government of an equal number of shares. The government owns 100 per cent stake in the company as of now, but its holding will come down by up to 18.18 per cent after the public issue.
REC provides loan assistance to state electricity boards and power utilities for investments in rural electrification schemes. The corporation's net profit rose by about 3.6 per cent to Rs 660 crore during 2006-07 against Rs 637 crore in the previous fiscal.
REC's IPO follows public offers from other state-run power companies. Power Finance Corporation's issue hit the market early this year, while Power Grid Corp is likely to be listed tomorrow. National Hydroelectric Power Corp has also filed draft prospectus with SEBI for its IPO to dilute 24 per cent stake.
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