Dr P V Ramesh's (IAS:1985:AP) shifting to the Ministry of Culture as DG, National Archives of India, from the post of CMD of Rural Electrification Corporation Ltd (REC) five months before his retirement in July is fraught with peculiar interpretations in view of the timeline approaching for the sale of REC's equities to PFC at a premium. People in power corridors find his abrupt transfer from REC more than a coincidence.

Indianmandarins has learned that when the CCEA decided on divesting REC shares, their value was quoted at (approx.) Rs 104. However, after the CCEA decision became public, the share value steadily rose to Rs 140. This was seen as an abnormal because most of the public-sector shares tend to decline when the announcement for their share dilution is made. This makes public investors respond enthusiastically to the sale of shares.

As planned, PFC is to acquire 52.63 percent government stake in REC in a merger deal. The Govt was earlier planning to sell the stake at a premium of about 15-20 percent which would have helped it mobilize Rs 15,000 crores. However, owing to the increased share price of REC, the PFC may have to look for additional funds to help the government with the much-needed revenue.

Reportedly, PFC was planning the acquisition through its reserves and surplus of Rs 10,000-Rs 12,000 crore and the balance was to be met through debt instruments. So, the company is in a quandary: if it raises more debt funds, its own shares may plummet causing grievous losses to its market capitalization. The government’s divestment proceeds have touched Rs 53,558 crore so far in the current fiscal against the full-year budget target of Rs 80,000 crore.

Indianmandarins has further learned that somehow the process of REC stake sale was delayed and during this intervening period, REC shares rose in value. This made the PFC cry foul and assert that it has limited funds to buy REC shares and the rise in REC shares may throw cold waters on its deal with the government.