NTPC-SAIL Power seeks to ride on a market rally that sent benchmark indices to record highs last week
New Delhi: A joint venture (JV) between state-owned power generator NTPC Ltd and steel producer Steel Authority of India Ltd (SAIL) plans to sell shares in one of the first initial public offerings (IPOs) in India this year, seeking to ride on a market rally that propelled benchmark indices to record highs last week.
Discussions are on over exploring the listing plan for NTPC-SAIL Power Co. Pvt. Ltd (NSPCL), which supplies electricity to Chhattisgarh, the Union territories of Dadra and Nagar Haveli, and Daman and Diu, and SAIL plants.
“While a final decision is yet to be taken, this is the right time for a listing given the market conditions. The company is doing well," said a person familiar with the plan, who spoke on condition of anonymity.
He declined to share the details of the IPO or the amount the company plans to raise. A second official confirmed the plans.
An NTPC spokesperson declined comment. Queries emailed to a SAIL spokesperson remained unanswered at the time of going to press.
Key stock indices rose to record levels on Friday for the fourth day in a row as investors cheered the European Central Bank’s expansion of its stimulus programme on top of favourable growth projections for the Indian economy by the World Bank and the International Monetary Fund.
The BSE Sensex gained 0.94% to close at 29,278.84 on Friday; Indian stock markets were closed on Monday.
According to PRIME Database, which tracks primary market activity, the current financial year (2014-15) has been a tepid year for public issues.
The year saw ₹ 5,534 crore raised through a mix of 26 IPOs, follow-on public offers (FPOs) and offers for sale (OFSs), compared with ₹ 52,219 crore raised through 90 public issues in 2007-08. The amount garnered in 2013-14 through 82 public issues was ₹ 15,234 crore.
NSPCL was formed in March 2001 and took over captive power plants of SAIL’s Durgapur steel plant in West Bengal and Rourkela steel plant in Odisha. It later took over the captive power plants of SAIL’s Bhilai plant in Chhattisgarh.
Of India’s current generation capacity, NTPC has a 17% share, with an installed power generation capacity of 43,128 megawatts (MW). The utility plans to add 14,038MW in 2012-17 and has budgeted an ambitious capital expenditure target of ₹ 1.5 trillion. It has set itself the target of becoming a 128,000MW power producer by 2032.
The demand for electricity from SAIL’s steel plants is also expected to go up, with its ₹ 72,000 crore modernization and expansion plan across steel plants in Bhilai, Bokaro, Rourkela, Durgapur and Burnpur expected to ramp up production capacity to 50 million tonnes per annum (mtpa) by 2025.
Production capacity is first expected to rise from the current 14 mtpa to 24 mtpa in 2015.
India’s energy woes have meant that the country has been hard-pressed to generate enough power to keep its economic engine chugging, and at a price that makes its manufacturing competitive.
“India’s electricity requirement is bound to go up, given the uptick in the Indian economy. This is a capital-intensive industry and capacity addition has to be a planned process, as new plants can’t be put up instantly when the demand kicks in," added the first person quoted above.
India faced a peak power deficit of 3.3% in December. Analysts say the data doesn’t capture the real demand, ascribing the lower deficit to the unwillingness of state electricity boards to buy enough power because they cannot afford to do so.
India’s per capita power consumption, around 940 kilo watt-hour (kWh), is already among the lowest in the world. In comparison, China has a per capita consumption of 4,000kWh, with the developed countries averaging around 15,000kWh.