NTPC floor price set at Rs 145, a 4.79% discount

Written by fe Bureau | Mumbai | Updated: Feb 7 2013, 10:12am hrs
The government has set a floor price of R145 per share to sell 9.5% of its holding in NTPC, a discount of 4.79% to the current market price.

The offer for sale (OFS) proposes to sell 78.32 crore shares. At the given floor price, the government could raise at least R11,353 crore the largest OFS from a state-owned entity in the current fiscal if the issue is fully-subscribed.

On BSE, NTPC closed 2.12% or R3.30 lower from the previous close of R152.30. The scrip has dropped nearly 10% in the last three months. Post-issue, the governments holding in NTPC will fall to 75% from the current 84.50%.

In a poll conducted among brokerages and institutions by FE, market experts and analysts recommended subscribing to the issue from a long-term perspective, citing cheaper valuations. Further, likely power sector reforms, the companys immunity to pricing and coal-linkages with Coal India would set the company in a favourable position, they said.

Citigroup Global Markets, Deutsche Equities, Goldman Sachs, Kotak Securities, Morgan Stanley India and SBI Capital Markets are the lead managers to the NTPC auction.

Last month, a JPMorgan research report gave a neutral rating to NTPC. We stay neutral ahead of imminent disinvestment of 9.5% stake which has contributed to the stocks recent under-performance.. At 1.5x P/BV, NTPC looks cheap in a historical context and relative to regional utilities.

Assuming the greater good (coal price pooling) is inevitable, we see the current price as an attractive entry opportunity, stated analysts Sumit Kishore and Deepika Mundra in the research note.

If the government manages to raise Rs 12,000 crore from the NTPC auction, total divestment proceeds in the current financial year will touch Rs 22,000 crore. The government had set a divestment target of Rs 30,000 crore for FY13, which was revised to Rs 27,000 crore late last month.

OFS has become the preferred route for many companies looking at diluting promoter stake. The transaction is completed within market hours in a single day in a transparent manner. It is also one of the permitted route for promoters who want to bring down their holding to comply with the minimum public shareholding norms.