The government today approved the FPO from Power Finance Corporation. The FPO would consist of two parts with a fresh issue of 15% and an offer for sale of 5% by the Government. The fresh issue would be 17,21,65,005 shares, while the 5% government’s offer would be 5,73,88,335 shares. The total issue would be for 22,95,53,340 shares.

Shares of PFC closed at Rs 249.60 and at this price the market cap of the company is Rs 28,648.34 crs. The issue at current market price would raise Rs 5,730 crs. This issue is likely to hit the markets only in the first quarter of the financial year 2011-12. Retail investors would be eligible for the 5% discount.

PFC had tapped the capital markets in January 2007 when the Government had divested 10% of its holding at a price of Rs 85. The present shareholding of the government is 89.78% while the public is 10.22%. The shares of PFC have been on a downtrend for the last three to four months and have fallen from a high of Rs 383 made on the 14th of October 2010, to an intraday low of Rs 239.10 made on Friday the 11th February, the last day of trading for the week.

The size of the issue is big and there could be some short term pressure on the share going forward. The company has earned a net profit of Rs 2,012.05 crs for the nine month period ended December 2010 against Rs 2,357.25 crs in the year ending March 2010.