IPO-bound PSUs in rush to appoint directors

IPO-bound public sector undertakings Power Grid Corporation of India, Rural Electrification Corporation (REC) and National Hydroelectric Power Corporation (NHPC) have already appointed independent directors on their boards or are in the final process of selection of independent directors to comply with the Clause-49 norms.

These norms make it mandatory for companies to have 50 per cent of their board members to be independent directors.

Power Grid Corporation, which on Tuesday announced Rs 2,984 crore IPO, has appointed five independent directors -- P K Shetty, professor and dean at National Institute of Advanced Studies, Bangalore, M S Kapur, retired CMD of Vijaya Bank, Bangalore, A S Narag, professor at the faculty of Management Studies, Delhi University, Anil K Agarwal, industrialist and former Assocham president, and F A Vandrevala, currently CMD of Hirco Developments Pvt Ltd.

Clause-49 of the listing agreement came into effect from December 1, 2006. Under this rule, companies need to have 50 per cent independent directors on their board, if these companies have executive chairman (as in the case of PSUs). If companies have non-executive chairman, the number of independent directors can be lower at one-third.

NHPC and REC, which have filed draft prospectus for IPOs in April and August respectively, are in the final stages of appointing independent directors, said bankers.

"The government has to approve the names," said sources.

The IPO by Power Finance Company (PFC), which was the first PSU to hit the market after the Clause-49 rule came into effect, was delayed by nearly nine months due to a delay appointing independent directors.

The company, which first filed its draft prospectus in June 2006, finally hit the market only in February this year, as the process of appointing independent directors dragged on, said the sources.

PFC was forced to restructure its board to induct four independent directors viz., IIM Indore director S P Parashar, IIM Bangalore director Prakash G Apte, former CMD of Eicher GroupS K Bhargava, consultant B K Mittal and former IDBI Chairman and Managing Director G P Gupta, after the Sebi observed that "PFC had not satisfied with the corporate governance requirement with regard to independent directors".

After the proposed IPOs , the government share in REC would come down to 81.22 per cent while in PGCIL and NHPC it would be 86.36 per cent each.

The three companies are now fully owned by the government