Govt raises Rs1,550 cr from REC share sale; issue subscribed over 5 times

The government's divestment programme for the current fiscal got off to a flying start with the sale of a 5-per cent stake in state-run Rural Electrification Corporation (REC) raising an estimated Rs1,550 crore today.

In fact, the issue was subscribed over five times on the back of strong institutional and retail demand, with bids received for 252.4 million shares against 49.3 million shares on offer.

At the floor price of Rs315 apiece, the government would collect over Rs1,550 crore. The sale was carried out through an offer for sale (OFS) mechanism through the stock exchanges.

The share sale received strong response from retail and institutional investors and was fully subscribed within an hour of its opening.

A total of 4,93,72,950 equity shares representing 5 per cent of the total paid-up equity share capital of Rural Electrification Corporation Limited was on offer at a base price of Rs315 per share.

The government has missed its divestment target for the past five year. The asset sale is key to the centre's meeting a fiscal deficit target of 3.9 per cent of GDP in the 2015-16 fiscal.

The government has made an early start this year, in a bid to raise about Rs70,000 crore (about $11.1 billion) through asset sales during the financial year ending March 2016.

The attractive valuation of Rs315 a share, which is less than the FY17 book value found overseas and domestic portfolio investor flocking to buy REC shares.

With the share sale, the government, which earlier owned a 65.6 per cent stake in the company, would now own 60.5 per cent in the company.

REC is primarily engaged in the financing of power projects.