The Telegraph
Since 1st March, 1999
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Goenkas weigh stake hike in CESC

Calcutta, May 8: The Goenkas may raise their stake in CESC, the Calcutta-based power utility, once the banks and financial institutions approve the company’s debt restructuring package.

“We can consider increasing our stake in the company once the debt restructuring is in place,” Sanjiv Goenka, vice-chairman of CESC, told The Telegraph here today. “The debt restructuring package is expected to be approved within another six to eight weeks’ time. There are lots of plans that we will unveil once the debt restructuring package is in place.”

Goenka said the promoter’s holding in the company is around 40 per cent. “We may adopt the creeping acquisition route to raise our stake,” he said.

The creeping acquisition route permits promoters to raise their stake in the companies they manage by 5 per cent every year through market acquisitions without attracting the rigours of Sebi regulations on an open offer at a matching price to small investors.

Corporate mavens and the company insiders feel that the Goenkas want to raise their stake to at least 51 per cent over a period of time so that they remain in a comfortable position.

CESC owes debts worth Rs 3,300 crore to banks, domestic financial institutions, foreign banks and foreign bond holders. Of this, around Rs 1,800 crore is owed to domestic institutions. ICICI Bank has the largest exposure of about Rs 900 crore to the company followed by Industrial Development Bank of India with about Rs 250 crore.

Multilateral funding agencies like International Finance Corporation and the Asian Development Bank have debt exposures of about Rs 300 crore and Rs 150 crore respectively. The other major creditors of the company are CDC Capital Partners with an exposure of Rs 100 crore and FRN holders with about Rs 350 crore.

The company has been discussing several debt restructuring proposals with the banks. The Goenkas have offered to pledge 40 per cent of their equity holding with the banks and financial institutions; some of the lenders have accepted this proposal while others have not.

“It is still too early to say what the ultimate figure will be,” says Goenka.

However, till the debt restructuring package is cleared, the company will have to repay its loans as per the formula worked out by the steering committee.

A six-member steering committee had been formed by the banks, financial institutions and multilateral funding agencies to draw up a debt restructuring package.

Under the original scheme of repayment, CESC was paying Rs 300 crore a year by way of interest. Principal repayment was to begin in September 2003. Under the new scheme, there will be no change in the interest outgo, but the principal repayment will start from April 2004.

The promoters are also negotiating with the banks and FIs on pumping another Rs 50 crore into CESC.

The company is also planning to bring down the volume of power purchase from the West Bengal State Electricity Board. It currently draws 1,100 million units from WBSEB as against 1,900 million units in the previous year.

“We have decided to buy a few 100 million units from WBSEB for which we will have to enter a new power purchase agreement with WBSEB,” Goenka said.

The company also has plans to increase the generation capacity of its plants.

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