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State-run Power Finance Corporation (PFC) today said it would set up a $1-billion private equity (PE) fund in joint venture with Tata Capital to invest in the equity of private power projects.
Tata Capital will have 51 per cent equity holding in the joint venture, while PFC would have 49 per cent stake. The fund initially is targeted to have corpus size of $1 billion, a company official said.
Along with debt, there is also huge equity requirement in power sector projects, so PFC has decided to set up a private equity fund, he said.
“We have selected Tata Capital as our joint venture partner for setting up a PE fund...in which they would have 51 per cent stake and PFC 49 per cent,” PFC Director Finance R. Nagarajan told presspersons.
“PFC is in the process of finalising the JV terms. The fund is expected to become operational over the next six-nine months period,” he said.
“To begin with we will target a corpus of $250-300 million,” Nagarajan said.
The power sector lender has already started funding for the availability of fuel sources such as coal mines, coal transportation facilities, and laying of gas pipelines to bridge the gap in availability of fuel sources.
PFC’s target for sanctions this fiscal (2012-13) stood at Rs 45,140 crore, of which it has sanctioned Rs 41,732 crore. Out of a Rs 40,000-crore distribution target, it has disbursed Rs 17,555 crore, he said.
According to the 12th Five-Year Plan projections, the GoI is targeting investments of Rs 45 lakh crore in the infrastructure sector, of which Rs 14 lakh crore is expected to be in the power sector.
The total disbursements (loan) according to the company’s balance sheet is Rs 1.40 lakh crore.
“The balance available is Rs 1.69 lakh crore, for future disbursements say over the next two-three years,” Nagarajan said.
PFC’s average cost of borrowing as on September 30, 2012 stood, at 9.16 per cent, while its net interest margin (NIM) was 4.23 per cent.
The interest spread of PFC — the difference between borrowing cost and lending rate — stood at 2.68 per cent, which has gone up compared to 2.25 per cent as on March 31, 2012.
The Government of India has 73.72 per cent equity shareholding in the company, which up till 2007 used to be a fully Government-owned entity.
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