New Delhi, March 21: The National Thermal Power Corporation (NTPC), the state-owned power utility, is planning to come out with a roughly Rs 800 crore flotation latest this year to expand its Rs 8,000 crore equity base.
The Union power ministry is currently preparing a proposal for NTPC’s initial public offering (IPO) that it intends to shortly place before the Union Cabinet for its approval.
The ministry was faced with two options to ramp up the equity capital of the power utility that is fully owned by the Centre: the first was to divest 10 per cent of the government’s stake in the capital market and the second was to issue fresh capital. The ministry has now decided on the second option.
“We will go to the Cabinet soon... There was an intense debate whether to acquire fresh 10 per cent equity to generate resources or to divest 10 per cent of the government’s stake... Finally the consensus emerged on increasing the equity through public issue,” power secretary R. V. Shahi said.
The Rs 800-crore public issue of equity by NTPC will enable the power utility to leverage more borrowings in an industry where the debt-equity ratio is typically 4:1.
The capital expansion is one of the ways that the state-owned power utility — the country’s largest with a generation capacity of 20,000 MW — will use to raise cash to finance its plans to raise its generation capacity by another 20,000 MW over the next 10 years.
NTPC needs about Rs 80,000 crore investment over the next 10 years to add the proposed 20,000 MW generation capacity.
The electricity business is just about beginning to show signs of emerging from the dark era of bad debts and unpaid bills as the Centre and a few states aggressively pursue power reforms.
Just yesterday, 24 states signed a landmark agreement that committed their electricity boards to clear dues worth Rs 37,400 crore that they owed to central power utilities like NTPC under a one-time settlement scheme.
NTPC stands to get Rs 19,000 crore through the bonds that these states will issue in favour of the central power utilities.
NTPC will also be the second enterprise in which the government has a substantial stake that will be hitting the market this fiscal. In June, the government will be coming out with a public issue to divest another 25 per cent of its stake in Maruti Udyog, the country’s largest carmaker.
Talk about an NTPC flotation has been swirling for over a year.