January 17, 2012

Stock: PFC, Edelweiss~  Sector: BFSI

Source: Business Standard

• Power Finance Corporation (PFC) may partner Edelweiss Financial Services for the $1-billion private equity (PE) fund it plans to establish.
• The power sector lender is in the final stages of zeroing in on a fund manager. “The last date for receiving the bids was January 11.
• Edelweiss Financial Services is the only one to bid,” Satnam Singh, chairman and managing director, PFC, told Business Standard.
• The company feels the clause on the exposure limit to the power sector might have acted as a deterrent for many firms that were keen to bid.
• “There was a clause that the bidders should not have more than 25 per cent exposure in the power sector, as it would lead to a conflict of interest with our business,” Singh said.
• The top firms which may have expertise in managing the fund have substantial exposure in the power sector, he added.
• While the government-controlled, non-banking financial company received only one bid, it can still go ahead with the decision to choose Edelweiss as its partner.
• “It was agreed in case we receive only one bid, we can go ahead with our decision,” Singh said.
• The committee set up to take decisions on the fund would meet to take the final call, he added.
• The fund would be established on a partnership basis, and PFC would own 49 per cent of the fund, while 51 per cent would rest with the partner.
• “We will begin the fund with $300 million and our contribution will be five per cent of the total. The same would hold good for the partner,” Singh said.
• The size of the fund would be increased to $1 billion in tranches. The profits earned would be distributed among the investors.
• “We would assess the best market practice while giving returns to investors. The returns would certainly be above 10 per cent,” he said.
• The fund would seek to provide equity support to various power projects in the country.