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Fair response to NTPC selloff

Mumbai, Feb. 7: The Centre today raised over Rs 11,400 crore from the sale of shares in state-owned National Thermal Power Corporation Ltd (NTPC).

The offer for sale (OFS) was over-subscribed and takes the government a step closer to its budgetary target of raising Rs 30,000 crore through the divestment route. So far, the Centre has raised just over Rs 21,000 crore.

The OFS constituted 78.3 crore shares of the power utility company and the floor price was fixed at Rs 145 per share, a 4.79 per cent discount over the closing price of the scrip on Wednesday. Details available from the stock exchanges showed in the evening that the issue witnessed bids for 132.84 crore shares, which means the issue was subscribed nearly 1.70 times. The final indicative price was Rs 145.91 per share.

Institutional bidders — who were required to stump up the entire price bid as margin — submitted bids for close to 63.50 crore shares. The remaining bids came from other investor categories where no margins had to be paid.

Market regulator Sebi had recently made some changes to OFS rules in a bid to make it more attractive to institutional investors. It had given institutions the additional option of submitting bids for shares without having to put up a 100 per cent upfront margin. Under this option, institutions will not be allowed to modify or cancel these orders.

The NTPC issue is the biggest divestment by the government this fiscal. The government has so far raised over Rs 10,000 crore by selling stakes in Hindustan Copper Ltd (Rs 808 crore), NMDC (Rs 6,000 crore), National Buildings Construction Corporation (Rs 127 crore) and Oil India (Rs 3,100 crore).

The government is now about Rs 8,500 crore short of its target. It is hoping to line up a few more issues before the fiscal year closes on March 31. These will include shares in Nalco, SAIL, MMTC and Rashtriya Chemicals & Fertilisers.

Last month, the Union cabinet approved the sale of another 10 per cent in Engineers India Ltd (EIL) through a follow-on public offering.

Market circles said the success of the NTPC offering should come as a big relief to the Centre, but they were not entirely sure of the investors’ profile. Although foreign institutional investors are believed to have put in money, analysts do not rule out the possibility of domestic institutions such as the Life Insurance Corporation accounting for a bulk of the sale.

Although some analysts were disappointed over the floor price fixed on Wednesday, various brokerages had urged investors to subscribe.

NTPC is India’s largest power generation company. It has an installed capacity of 39,674MW.

It plans to raise its generation capacity to 51,000MW by 2016-17. Of this, around 4,170MW will be added this year and 2,718MW in 2013-14.

 
 
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