NTPC shares declined as much as 3 per cent on Tuesday after government started selling 5 per cent stake in India’s largest power producer at a floor price of Rs 122 per share to raise Rs 5,029 crore.
Moody’s Investors Service said on Tuesday said that the government’s 5 per cent stake sale in NTPC will not impact the rating of the country’s largest power producer. Moody’s has a ‘Baa3’ rating on NTPC with a positive outlook.
“We expect the government to maintain its majority stake in the company even after the sale of 5 per cent stake which, as such, does not affect our assessment of sovereign support for NTPC,” said Abhishek Tyagi, V-P and Senior Analyst, Moody’s.
At 10.54 am, shares of NTPC were trading 2.09 per cent down at Rs 124.35 on the National Stock Exchange (NSE). The scrip opened at Rs 123.25 and has touched a high and low of Rs 125 and Rs 123.20, respectively, in trade so far. The share price of the company ended 2.33 per cent down at Rs 123.90.
Market experts are looking bullish on the offer for sale (OFS) of NTPC. According to JP Morgan, the OFS is a good entry point for investors and would also remove a stock overhang.
The offer for sale opens for subscription to non-retail investors on February 23, 2016. Non-retail investors who place their bids on February 23, 2016, will be allowed to revise their bids on February 24, 2016. Retail investors shall be allowed to place their bids only on February 24, 2016. Angel Broking advised investors to monitor the bidding pattern and bid accordingly (slightly above cut-off in case of oversubscription).
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Retail shareholders will get an additional discount of 5 per cent over their bid price, implying a floor price of Rs 116 (around 9 per cent discount to closing price). A minimum of 20 per cent of the issue is reserved for retail investors.
Shares of NTPC plunged nearly 15 per cent so far this year whereas Nifty slid 10 per cent during the period. NTPC is the first company to hit the markets under the revised offer for sale (OFS) guidelines of market regulator Sebi. The OFS route has now been spread over two days.
Angel Broking in a research note said, “We like NTPC for the growth offered by its regulated equity model, huge capacity addition plans and expected improvement in demand for power in the country. At the offer-for-sale (OFS) price of Rs 122, the stock is available at an FY2017E EV/EBITDA of around 8.3x and P/E of 9.2x FY2017E EPS estimate of Rs 13.3. We remain positive on the stock with a target price of Rs 146, based on 1.3x FY2017E BV, implying a 20 per cent upside from the OFS floor price (26 per cent for retail investors). Hence, we recommend investors to subscribe for NTPC shares in the OFS.”
For the quarter ended December 2015, the company posted net profit of Rs 2492.87 crore, down 18.90 per cent, against Rs 3074 crore in the corresponding quarter a year ago.
(With agency inputs)