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NIF to get corpus from Power Grid IPO

Investment fund to benefit from IPOs of 3 power companies, including NHPC & Power Grid.

Aug 22, 2007, 02.16 AM IST
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NEW DELHI: After remaining non-functional for about two years, the National Investment Fund (NIF) expects to get its initial corpus from the IPO of Power Grid Corporation of India, (PGCIL) slated to come in the next couple of months.

Sources in the department of disinvestment said though the fund does not have any corpus as of now, it will get the funding from the forthcoming IPOs of three power companies, including those of PGCIL and NHPC where the government plans to sell 5% each.

“Parliament has also been apprised of the progress and we expect to get the initial corpus by October this year as all the roadblocks in the way of PGCIL’s initial offer have been removed,” a finance ministry official said. “All the administrative problems have been solved and the fund managers will start operating the fund as soon as the IPOs are announced,” the official said. The government has appointed three fund managers for the NIF : — LIC Mutual Fund, SBI Mutual Fund and UTI Mutual Fund.

The fund, set up with much fanfare in November 2005 to manage proceeds from the government’s stake sale, in a listed and unlisted profitable public sector undertakings, has no corpus till now. Initially it expected to get funds from the disinvestment in Maruti Udyog. NIF, however, did not receive any fund from the stake sell on the pretext that MUL, in which the government sold an 8% stake to raise Rs 1,567 crore, was not a PSU as the government had owned only 18.2% of the company before the stake sale. The proceeds from the MUL disinvestment lies with the consolidated fund of India.

NIF was set up so that the government can invest the proceeds from stake sale in PSUs in the capital markets and use the returns to finance social sector projects in areas and capital investment in select PSUs. Under the scheme, the government planned to create a “non-depleting fund” from the proceeds of the disinvestment in PSUs. The fund mangers would strategically invest the money in the capital market and other places. Out of the total income, 75% should be spent for funding social sector projects while the balance 25% is to be utilised for the revival of sick PSUs.

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