New Delhi, Feb. 13: The government plans to go ahead with the French auction route for the Rural Electrification Corporation’s follow-on offer despite the poor response to NTPC’s offer.

“There would be no change in our policy for the REC offer,” power secretary H.S. Brahma said.

He said the ministry would study the poor response to the follow-on offer of NTPC. “The response to the NTPC offer should have been better. There is something wrong with us, why has the FPO been unsuccessful,” he said.

Brahma said an empowered group of ministers (eGoM) will meet on February 17 to fix the offer price of REC, a financier of power projects.

The government plans to raise around Rs 4,181 crore through the FPO of 171.7 million shares, amounting to a 5 per cent equity sale. The offer is slated to open on February 19.

The cabinet committee of economic affairs had approved a 5 per cent divestment of government equity in REC, and another 15 per cent issue of fresh equity through a follow-on public offer. Its holding will come down to 66.81 per cent on the expanded capital base.

In REC’s offer, 50 per cent shares will be reserved for institutional bidders to be offered through the French auction route, with the balance divided between retail investors (35 per cent) and high net-worth individuals (15 per cent).

French auction norms allow retail investors to buy shares at the floor price, while institutional bidders are required to bid at any price above the floor price. In a conventional book-building process, an investor can change the bid price at any point of time.

NTPC came out with an FPO earlier this month through which the government divested 5 per cent of its equity in the PSU. The size of the issue was 41.22 crore shares at a floor price of Rs 201 per piece.