India's state-run Power Finance Corporation Ltd will raise up to $1 billion in its next week's share sale, in what could be the biggest equity offering in the country's this year amid volatile market conditions. Power Finance, a lender to power projects, has fixed the price band for its offering at 193 rupees to 203 rupees ($4.3-$4.5) a share, Power Secretary P. Umashankar said on Friday, a discount of as much as 10 percent from its current market price.
The company is selling about 230 million shares and at the top end of the band, it would raise 46.7 billion rupees ($1 billion). The issue opens on Tuesday and will close on May 12 for institutional investors and a day later for retail bidders. Retail investors will get a 5 percent discount to the final price, which will be fixed after the sale closes on May 13, two sources with direct knowledge of the issuance told Reuters.
The issue would be a key test for investor appetite in Asia's third-largest economy, amid a choppy market, slowing foreign fund flows, corruption scandals and rising interest rates - all of which have played a role in delaying planned share sales. The Mumbai market is down 9.5 percent this year, after having risen about 18 percent last year.
Shares in Power Finance, which the market values at $5.6 billion, ended down 0.3 percent on Friday at 214.45 rupees, in the Mumbai market that rose 1.7 percent. The stock is down 31 percent this year. The issue is the first share sale in a state-run firm to be launched this year after big issues such as Coal India's record $3.4 billion IPO and Power Grid's $1.7 billion follow-on offering late last year.
The Power Finance issue is part of the government's plan to raise $8.9 billion through share sales in public sector firms in this fiscal year to end-March 2012, to cut high fiscal deficit and garner funds to spend on welfare schemes. Power Finance will sell 15 percent in fresh equity shares while the Indian government will divest 5 percent stake in the firm through the offering, the firm has said in its prospectus filed with the regulators.
The company plans to use the proceeds to boost its capital base. Indian companies raised $24.9 billion from equity issues in 2010, posting a growth of 22 percent from the previous year and marking the market's best annual performance since 2007, Thomson Reuters data showed.
In the first quarter of this year, 22 firms have raised $2.3 billion in the Indian market, the data showed. Bankers have said the fundraising through share sales in 2011 will be lower than last year due to the adverse market conditions. Equity sales this year included steelmaker Tata Steel's $765 million issue, state-run lender Canara Bank's $442 million share sale to institutional investors and a $98 million IPO by PTC India Financial.