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With Left out, 3 hydropower cos set to list

With Left out, 3 hydropower cos set to list
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First Published: Thu, Jul 31 2008. 12 47 AM IST
Updated: Thu, Jul 31 2008. 12 47 AM IST
The Left Front’s withdrawal of support to the ruling United Progressive Alliance, or UPA, and the latter’s subsequent victory in a trust vote in Parliament have lent momentum to efforts by the government to sell some of its stake in a few state-owned companies, even as it allows them to sell shares to the public to raise money.
At least two state-owned companies in the hydropower business have confirmed that they plan to tap the capital markets soon to raise funds for expansion.
A top power ministry official, who asked not to be named, said the government has already proposed initial public offerings, or IPOs, to state-run firms such as Satluj Jal Vidyut Nigam Ltd, or SJVNL, Tehri Hydroelectric Development Corp. Ltd, or THDC, and North Eastern Electric Power Corp. Ltd, or Neepco.
“It is for their boards to decide the timing and the size of the issue. Satluj Jal Vidyut Nigam Ltd will be the first off the block,” this official added.
The government plans to allow these companies to sell shares amounting to up to 10% of their authorized share capital to the public. It is also expected to piggyback on the IPOs and divest a 5% stake in each, said another power ministry official who did not wish to be identified.
SJVNL will be the fourth state-owned power company to sell shares to the public. Power Finance Corp. and Power Grid Corp. of India Ltd have already done so. NHPC Ltd’s share sale, delayed over the appointment of an independent director, is expected shortly, according to the official.
While Neepco is fully owned by the government of India, both SJVNL and THDC are joint ventures between the Centre and the states of Himachal Pradesh and Uttarakhand, respectively.
H.K. Sharma, chairman and managing director, SJVNL, confirmed the share sale and said: “The government of India has decided that we should come out with an IPO.”
“We are in the process of coming out with the IPO. The draft cabinet note has been submitted. Once it gets approved, we will appoint the lead managers,” said a Neepco official who didn’t wish to be identified.
R.S.T. Sai, chairman and managing director of THDC, didn’t respond to phone calls or to the message left on his cellphone.
The government had earlier planned to launch these IPOs after the share sales of Power Finance Corp. and PowerGrid. The plans, however, had to be jettisoned in the face of stiff opposition from the Left Front. To be sure, some of the UPA’s rivals could still oppose such plans, but these share sales do not need to be approved by Parliament.
“These companies will come out with their IPOs after the launch of NHPC’s IPO. These PSUs (public sector undertakings) already have the (requisite number of) independent directors on board and can tap the markets as per their requirements. We see this happening within the next year,” added the second power ministry official.
Clause 49 of the listing agreement between publicly listed firms and stock exchanges states that half of the directors on the board of companies seeking a listing have to be independent—they should neither be employees of the company nor associated with entities that have any relationships with the company.
The 11th Plan (2007-12) has set a target of adding 78,577MW of power generation capacity, requiring an investment of Rs10.31 trillion.
According to India’s power ministry, there is likely to be a Rs4.51 trillion shortfall in this investment which the government wants state-owned firms to make up by raising funds.
The share sales by these firms could be successful provided they wait for the market sentiments to improve, said one expert.
Shubranshu Patnaik, executive director, PricewaterhouseCoopers, said: “These companies need huge capital requirements for their projects. In principle, it is the right way to go about it. The timing is a matter of concern.”
The Left Front, however, said the government could not go ahead with its stake sale plans.
“The government cannot do this since this is a part of the Common Minimum Programme, or CMP, of the UPA. Irrespective of whether or not the government is functioning with Left (Front) support, it should not go ahead with this ...,” said Communist Part of India (Marxist) leader Nilotpal Basu.
Ruhi Tewari contributed to this story.
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First Published: Thu, Jul 31 2008. 12 47 AM IST