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Calcutta, Aug. 19: Power utility CESC today informed stock exchanges that its management had approved a proposal for preferential allotment of 33 lakh shares to the promoters of the company — the Rama Prasad Goenka (RPG) group.
The lenders of CESC — which include foreign financial institutions like IFC and CDC — had asked the RPG group to infuse Rs 50 crore and pledge its entire equity stake in the power utility in return for restructuring of high-cost debts.
Though the promoters and the lenders have yet to agree on the conditions for restructuring of CESC’s debts, this is the first time the Goenkas have made a formal commitment to bring in fresh funds into the company. The cash that they bring in will be used to repay part of CESC’s borrowings.
CESC did not, however, indicate the price at which the shares will be issued to the promoters. At current market price of the stock (Rs 47.80 on BSE), the preferential issue will fetch close to Rs 16 crore. The shares, however, could be allotted at a higher price.
Sumantra Banerjee, the managing director of CESC, said: “We should be able to reach an agreement with the lenders by the end of September or early October. What we are seeking is an extension of the tenure of the loans by two-and-a-half to three years and a reduction in the interest rate.”
Extension of the tenure would help CESC match the repayment of its borrowings with realisation of Rs 540-crore in arrears. CESC will be realising the amount from its consumers in instalments over several years.
The promoters have offered to pledge up to 40 per cent of their holding in the company, or roughly 16-20 per cent of CESC’s shares. The Goenkas’ declared holding in the power utility is 38.27 per cent, but their actual control — which include shares held by associates — is believed to be close to 50 per cent.
“What we have been trying to explain is that CESC suffered from a cost-revenue mismatch. But the tariff having been revised with retrospective effect, the inherent viability of the business is now beyond doubt.
“So, there is no reason why the lenders should have any concerns about recoverability of their capital and insist on the promoters pledging their entire holding in the company,” Banerjee added.
At the meeting of the CESC board today, the results for 2000-01 were recast, and accounts for the next two years were approved. The results were revised to reflect the impact of the tariff revamp. The company’s pre-tax loss for 2000-01 came down to Rs 23 crore as a result. In 2001-02, CESC reported a loss of Rs 103 crore, and in 2002-03, it profited Rs 7.6 crore.