Mumbai: Shares in Power Grid Corporation of India fell more than 5% early on Monday after the state-run electricity transmission utility fixed the price band for its up to $1.7 billion share sale at a 12-17% discount to its Friday closing.
The Power Grid share sale comes on the heels of a highly successful $3.4 billion IPO of state-run Coal India but is not expected to generate the same level of interest because the stock is already listed.
“The market price over the next few days would move towards the discounted price,” said Ambarish Baliga, vice-president at Karvy Stock Broking.
The Coal India share sale received bids worth more than 15 times the shares on sale and made a spectacular 40% gain in its trading debut on Thursday.
The government is looking to raise roughly $8.5 billion from share sales in 2010/11 as it aims to bring down its fiscal deficit by selling stakes in some 60 state-run firms over the next few years, but its efforts to shed stakes in already listed companies have met with mixed success.
Sales of stakes earlier this year in already-listed NTPC and NMDC were fully subscribed only after state-run insurers and banks snapped up shares that were largely ignored by retail investors. A $760 million share sale by listed Rural Electrification Corp saw stronger demand.
“Its quite natural that people who have this stock will sell and try apply in the FPO (follow on public offer) and make that arbitrage,” Baliga said.
At 10:15 am, shares cut their early losses and were trading down 3.14% at Rs98.80 in a Mumbai market that was down 0.4%.
The share sale opens on Tuesday and ends on Friday. On Sunday, the Indian government fixed an indicative price band of Rs85-90 ($1.9-$2) for the sale of a 20% stake in the company.
Retail investors and employees will be offered a 5% discount on the issue price, the firm said in an exchange filing on Monday.
Half of the 841.7 million shares on sale are part of the government’s existing stake in the firm, and half are newly issued shares by the company.