REC shares to be offered at 7.8 per cent discount

The government today set a base price of Rs203 a share for the follow-on public offer of the Rural Electric Corp Ltd, which is a 7.8 per cent discount on the current market price. This was decided by an empowered group of ministers that met on Wednesday to finalise the floor price of the offer, which opens for subscription on Friday.

The power project finance company plans to sell 171.7 million shares, including a fresh issue of 128.7 million shares, which will result in an equity dilution of 17.39 per cent. The government's stake in the company will go down to about 66 per cent from 81.82 per cent at present. The issue closes on 23 February.

Shares will be allocated to retail and high net-worth individuals at the allotment price, while institutional investors have to bid for their price and quantity, chairman and managing director P Umashankar had said earlier.

Of the 17.17 million shares, half will be offered to institutional shareholders via bidding, while not less than 35 per cent of the issue size will be allocated to retail investors.

The REC offer would have both upward and downward revision of bids. The government has been looking at ways to make the share sale of state-run companies attractive under the French auction route after the muted response to the recent NTPC issue, which adopted this route. Under this model, institutional buyers are free to bid above the floor price.