PFC, NTPC stake sales hit borrowing clause hurdle

New Delhi: The government is facing hurdles in trimming its stakes in Power Finance Corp. Ltd (PFC) and NTPC Ltd, as the companies may breach a bond covenant that requires the companies to be majority-owned by the government.

Reducing the government’s stake to less than 50% will also increase overseas borrowing costs for these companies, as they will lose their quasi-government status as borrowers.

NTPC and PFC are among state-run companies in which the government plans to reduce its stake by selling shares through its two exchange-traded funds (ETFs), a basket of securities that trade on exchanges. The government sells its stakes in listed central public sector enterprises (CPSEs) through the CPSE ETF and Bharat 22 ETF.