(ET)
India is considering a proposal to combine two state-run lenders to utilities, REC Ltd. and Power Finance Corp., according to people familiar with the discussions, as it seeks to raise funds to bridge a budget gap.
The first phase of the deal will see REC acquiring a majority stake in Power Finance valued at $2.5 billion possibly by the year ending March 2019, the people said, asking not to be named as the talks aren’t public. Subsequently, the plan is to merge thesubsidiary with REC, a departure from the original plan to keep their operations separate. Power Finance had a market value of 268.8 billion rupees ($3.8 billion) on Tuesday.
Prime Minister Narendra Modi’s government is seeking ways to narrow the country’s budget deficit to help finance public welfare projects ahead of elections. The sale of stake in Power Finance mirrors a similar deal earlier this year, when state explorer Oil & Natural Gas Corp. bought a controlling stake in in refinery Hindustan Petroleum Corp.
