Centre clears 5% stake sale in NTPC, follow-on offer by Dec

Proposed sell-off may fetch Rs 8,800 cr at current share price.

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New Delhi/Chennai, Oct. 19

The Centre has cleared partial sale of its stakes in state-run power major NTPC Ltd and an unlisted hydro-electric firm Satluj Jal Vidyut Nigam Ltd (SJVNL) through the book-building route in the domestic market.

The Cabinet Committee on Economic Affairs (CCEA) on Monday gave its nod to sell 5 per cent of the Centre's stake in NTPC and 10 per cent in SJVNL, the Commerce and Industry Minister, Mr Anand Sharma, told reporters after the meeting.

GOVT HOLDING

In the case of NTPC, which made an initial public offer in 2004, the Government will divest stake through a follow-on public offer, which is likely by December, a senior Power Ministry official said.

Post the stake dilution, the Government's holding in NTPC would fall to 84.5 per cent from the current 89.5 per cent. "To make it inclusive and participatory, part of the shares would be offered to the employees of the state-run firms," Mr Sharma said.

At the current price of Rs 216 a share, the proposed 5 per cent NTPC stake sale could mop up about Rs 8,800 crore.

"On disinvestment of the proposed equity, it is expected that the market capitalisation of NTPC would be higher and it would help the company raise resources in the international market on competitive terms," he said.

The CCEA also approved offloading 10 per cent of the Centre's 75 per cent stake in SJVNL — a joint venture between the Union Government and the Government of Himachal Pradesh (which holds the remaining 25 per cent stake). The paid-up equity of the company is Rs 4,108.81 crore.

The proceeds would go into the National Investment Fund, which was set up in 2005.

According to market analysts, a follow-on public offer of NTPC, the second most valued public sector company with a market capitalisation of over Rs 1.77 lakh crore, would serve as an overall sentiment booster.

RECENT IPOs

The performance of recent public issues at the secondary market, however, has been rather lacklustre. Of the 10 latest offerings, only three — Oil India, Jindal Cotex and Mahindra Holidays — are quoting above IPO price.

NHPC, which raised about Rs 6,000 crore through the IPO and got subscribed by over 23 times, has been teetering around the Rs 33-35 range against the issue price of Rs 36.

The other power major Adani Power is ruling around the issue price of Rs 100.

However, Oil India has managed 13 per cent returns since its listing on September 30. Retail participation in recent IPOs has been lukewarm.

NHPC got subscribed 23 times in the qualified institutional buyer portion compared with just three times in the retail category.

JSW Energy, Indiabulls Power, Cox and Kings (India) and Emaar MGF are some of the companies that plan to raise funds through capital market.