Mumbai: State-run NTPC Ltd’s divestment of a 9.5% government stake via an offer for sale (OFS) closed on Thursday with a subscription of 1.7 times for the 78.32 crore shares on offer, thus taking the government closer to asset-sale target for the year and helping to rein in the fiscal deficit.
The sale will fetch the government at least Rs.11,428.5 crore at an indicative price of Rs.145.9 a share. This is the third largest divestment after Coal India Ltd’s initial public offering in 2010 and ONGC’s OFS last year.
“The OFS was an overwhelming success and a reflection of the strong appetite for shares of well-run PSU companies. Strong performance track record of NTPC, confidence-building measures undertaken by the finance minister and the optimum floor price were some of the key success factors for the issue,” said V. Jayasankar, senior executive director and head of equity capital, Kotak Securities Ltd.
NTPC fell 2.7% to Rs.148.15 on BSE, while the benchmark Sensex shed 0.3% to end at 19,580.32 points.
Separately, HSBC Securities raised its rating on NTPC to overweight from neutral, saying stock correction and improving fundamentals provide upside potential.
HSBC analysts Arun Kumar Singh and Jenny Cosgrove said they expected the company to report 10% earnings growth on a compounded annual growth rate (CAGR) basis over the next three years on the back of 10 gigawatts of capacity addition and marginal improvement in utilization.
“Most bids have come in the Rs.145-146.25 range and the cut-off price is likely to be around Rs.146,” said one of the bankers to the issue on condition of anonymity. “The issue, which saw good interest from foreign institutional investors (FIIs), had names including government of Singapore, PPM America Inc., HSBC Halbis Partners (U.S.A) Inc., among others,” the banker said.
Domestic institutional investors including insurance companies such as Life Insurance Corporation of India and Bajaj Allianz, mutual funds such as ICICI Prudential were also major bidders, according to this person. Mint couldn’t independently verify the identity of the bidders.
With this issue, the government will have raised at least Rs.20,000 crore against the asset-sale target of Rs.30,000 crore for the fiscal. The success of the issue is likely to encourage the government to use the OFS route to pare its stake in other state-run companies such as Steel Authority of India Ltd, Bharat Heavy Electricals Ltd and National Aluminium Co. Ltd in the coming weeks.
“A lot of institutional interest was seen for the NTPC’s OFS as the pricing was attractive. This definitely may translate to more divestments happening in near future, as good appetite for NTPC hints at the success of the offers that will follow,” said Deven Choksey, managing director and CEO, KR Choksey Shares and Securities.