PFC’s Buyout Of REC Will Hurt Its Capital Buffers

PFC’s Buyout Of REC Will Hurt Its Capital Buffers

India’s plan to ask Power Finance Corporation Ltd. to buy the government’s 52 percent stake in state-run peer REC Ltd. will help it narrow the budget gap. But that will also bring the PFC’s mandatory capital buffers below the regulatory level.

The cabinet approved the sale today, Finance Minister Arun Jaitley said after a meeting. The modalities will be worked out by a committee comprising him, secretaries of the departments involved and Union Minister Nitin Gadkari, he said.

The Economic Times first reported that the government is now considering a proposal to make PFC acquire REC in a Rs 14,000-crore deal. BloombergQuint hasn’t be able to independently verify the the number. At the current market prices, the government’s stake in REC is worth around Rs 11,000 crore.

The deal will bring the government closer to its Rs 80,000-crore disinvestment target for the ongoing financial year—it has so far raised Rs 32,737 crore. Read More

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