REC- 1-51.p65 - Rural Electrification Corporation Ltd.

RURAL ELECTRIFICATION CORPORATION LIMITED
EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES
ACT, 1956 IN RESPECT OF SPECIAL BUSINESS SET OUT IN THE NOTICE.
ITEM NO. 6
As per the provisions of Section 293(1) (d) of the Companies Act, 1956, the Board of Directors of the Company shall not except with the
consent of the Company in General Meeting borrow moneys, together with the moneys already borrowed by the Company, in excess of
the paid-up capital and free reserves of the Company. At the 40th Annual General Meeting of the Company held on 19th September, 2009,
the Members of the Company had by resolution granted powers to the Board of Directors of the Company to borrow moneys upto a total
amount of Rs. 75,000 crore (Rupees Seventy Five Thousand crore only). The total borrowings of the Corporation is Rs. 55948 crore as on
31st March 2010 and a sum of Rs. 28000 crore is likely to be borrowed during the financial year 2010-11, while repayment obligation for
the current financial year is Rs. 11,600 crore approximately.
The overall borrowings at the end of the financial year 2010-11 may be within the existing approved limit of Rs. 75000 crore. However
the borrowings may exceed this limit in the first quarter of the next financial year 2011-12 (before the next Annual General Meeting).
Therefore the consent of the Members is sought under Section 293(1) (d) of the Companies Act, 1956, for increasing the limit from Rs.
75,000 crore to Rs. 100,000 crore to cover the further requirement of borrowings.
The Board of Directors of the Company at the 365th Meeting held on 7th July, 2010 has approved the above proposal and recommends the
passing of the proposed Ordinary Resolution by members of the Company as contained in the Notice.
None of the Directors is interested or concerned in the proposed Ordinary Resolution.
ITEM NO. 7
As per the provisions of Section 293(1) (a) of the Companies Act, 1956, the Board of Directors of the Company shall not except with the
consent of the Company in General Meeting create mortgage and/or charge on all or any of the immovable and/or movable properties of
the Company, both present and future, or of the whole or substantially the whole of the undertaking or undertakings of the Company.
The operations of the Company have increased substantially and in order to meet the growing fund requirement of the Company
additional funds are required to be raised by creation of security on the immovable/movable properties of the Company. Therefore it is
proposed to authorise the Board of Directors of the Company to mortgage/create charge on immovable and/or movable properties of the
Company, both present and future, for securing loan upto Rs. 100,000 crore for the purpose of the business of the Company.
The Board of Directors of the Company at the 365th Meeting held on 7th July, 2010 has approved the above proposal and recommends the
passing of the proposed Ordinary Resolution by members of the Company as contained in the Notice.
None of the Directors is interested or concerned in the proposed Ordinary Resolution.
ITEM NO. 8
In the month of March, 2008, the Company made an Initial Public Offer (IPO), which comprised of a fresh issue of up to 7,80,60,000
equity shares and an Offer for Sale of up to 7,80,60,000 equity shares by the President of India acting through Ministry of Power,
Government of India. In the Post- IPO scenario, the shareholding of the Government of India reduced from 100% to 81.82% and the
balance was held by the others. Subsequently, in the month of March, 2010, the Company made a Further Public Offer (FPO), which
comprised of a fresh issue of up to 12,87,99,000 equity shares and an Offer for Sale of up to 4,29,33,000 equity shares by the President of
India acting through Ministry of Power, Government of India. In the Post- FPO scenario, the Shareholding of the Government of India has
reduced from 81.82% to 66.80% and the balance 33.20% is held by the others.
Before FPO of the Company, the Foreign Institutional Investors (FIIs) held 7.68 % of paid-up capital of the Company which increased to
16.38 % of paid-up capital after allotment/ allocation (on 05.03.2010) of Equity Shares in FPO of the Company. Presently the FIIs holding
is 19.90 % (as on 16.07.2010) of increased paid up capital of Company.
As per the Master Circular No.1/2009-10 dated July 1, 2009, the Reserve Bank of India has inter alia given general permission to SEBI
registered FIIs/sub-accounts to invest under the Portfolio Investment Scheme (PIS) as under:-
(i) Shareholding-
(a) Total shareholding of each FII /sub-account under this Scheme shall not exceed 10 per cent of the total paid-up capital or 10
per cent of the paid-up value of each series of convertible debentures issued by the Indian company.
(b) Total holdings of all FIIs /sub-accounts put together shall not exceed 24 per cent of the paid-up capital or paid-up value of
each series of convertible debentures. This limit of 24 per cent can be increased to the sectoral cap / statutory limit, as
applicable to the Indian company concerned, by passing a resolution of its Board of Directors followed by a Special Resolution
to that effect by its General Body.
As per Sector-specific policy for foreign investment provided in Annex-I of the Master Circular of RBI dated July 1, 2009, the
sectoral cap/statutory limit applicable for NBFCs like REC is 100% of Equity under Automatic Route subject to certain conditions
prescribed therein.
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