Rural Electrification IPO to open on Feb 19 2008

Rural Electrification Corporation (REC), one of the leading public financial institutions in Indian power infrastructure, proposes to enter the capital markets on Feb. 19, 2008 with a public issue of 156.12 million equity shares of Rs 10 each through 100% book building process.

The issue comprises a fresh issue of up to 78.06 million equity shares by REC and an offer for sale of up to 78.06 million equity shares by the president of India acting through the ministry of power. The net issue to the public will be up to 152.21 million equity shares, after allowing for reservation of up to 3.90 million equity shares for subscription by eligible employees as defined in the red herring prospectus (RHP). The issue shall constitute nearly 18.18% of the fully diluted post-issue capital of REC. The Issue closes on Feb. 22, 2008 and the price band has been fixed at Rs 90 to Rs 105 a
share of Rs 10 each. IL & FS Investsmart Securities, ICICI Securities and SBI Capital Markets are helping the company to raise maximum of Rs 16.39 billion via this issue.

The company proposes to utilize the net proceeds from the fresh issue to augment its capital base to meet the future capital requirements arising out of growth in its assets, primarily its loan and investment portfolio due to the growth of the Indian economy and for other general corporate purposes including meeting the expenses of the issue. The company is seeking to strengthen its capital base to improve its borrowing capacity in order to support the future growth in its assets.

REC is one of the leading public financial institutions in Indian power infrastructure, engaged in the financing and promotion of transmission, distribution and generation projects throughout India. It occupies a key position in the GoI`s plans for the growth of the Indian power sector. Since its inception in 1969, the company`s mandate has evolved to permit it to finance all segments of the power sector throughout the country. It provides funding to clients and assists them in formulating and implementing various types of power project-related schemes. Its clients include public sector power utilities at the central and state levels and private sector power utilities. Additionally, it finances power projects for its joint sector clients. It aims to capitalize on the increasing private sector participation in the Indian power sector.

The company occupies a unique position within the area of rural electrification of India and it currently administer grants and provide loans as the nodal agency for the RGGVY, which is primarily aimed at the electrification of all villages in India. As a public sector undertaking, it has been accorded `Mini Ratna Grade-I` status by the GoI by virtue of its operational efficiency and financial strength, which affords greater operational freedom and autonomy in decision-making.

Domestically, it holds long-term borrowing ratings of `AAA`/Stable from CRISIL, `LAAA` from ICRA and `AAA(ind)` from Fitch, each of which is the highest long-term domestic rating of the respective agency. On an international basis, the company holds long-term borrowing ratings of `BBB-` and `Baa3` from Fitch and Moody`s, respectively, which are on par with sovereign ratings for India.