The 9.5% stake sale in state-owned electric utilities company NTPC on Thursday saw a good response with the issue subscribed 1.7 times. The sale of 78.33 crore shares, at the indicative price of R145.96, will fetch the government close to R11,500 crore, making it the biggest divestment in the current fiscal. The cut-off price is expected to be R145.55 per share. With the NTPC sale complete, the total divestment proceeds for the current financial year will touch nearly R22,000 crore. The government had set a divestment target of R30,000 crore for the fiscal.
Merchant bankers said the response to the offer for sale (OFS) was strong across investor categories, especially domestic institutional investors (DIIs) and foreign institutional investors (FIIs). While DIIs are believed to have written out cheques for around R4,000-5000 crore, retail and high net-worth individuals are understood to have placed bids for over R1,000 crore. Following the issue, the government’s holding in NTPC will fall to 75% from 84.50%.
As per BSE data, the auction received bids for 132.84 crore shares against 78.33 crore shares on offer, at an indicative price of R145.91 per share. The indicative price is the volume-weighted average price of all the valid or confirmed bids. The NTPC stock closed at R148.15, down 2.72% from Wednesday’s close. The scrip has given negative returns of around 12% in the last three months compared with the Sensex’s 5% returns in the same period. Its 52-week high is R190.30 while the low is R138.95.
In a research note, JPMorgan had noted that at a price of Rs 152, the stock was trading at a price to an estimated book value for FY14 of 1.5 times and appeared 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,” the brokerage noted.
Ravi Mathur, disinvestment secretary, said the government was satisfied with the response to the NTPC offer. Mathur told reporters in New Delhi that FIIs had bid in the initial part of the day with one FII putting in a large order, exceeding Rs 1,000 crore. “More bids came in towards the end of the day, after 2.30pm, and the orders were typically around $50-100 million,” Mathur added.
Most brokerages and institutions FE had polled on Wednesday recommended subscribing to the issue, citing cheaper valuations, power sector reforms, the company’s immunity to pricing and coal linkages with Coal India that would set the company in a favourable position.
Apart from NTPC, the current financial year has seen the government diluting its stake in Oil India (Rs 3,100 crore), Hindustan Copper (Rs 800 crore), NMDC (Rs 6,000 crore) and NBCC (Rs 125 crore) through the OFS route. The government also plans to dilute its stake in SAIL, Nalco, Neyveli Lignite and Rashtriya Chemicals and Fertilizers but a final call on pricing and timelines is yet to be taken. While the divestment secretary refrained from divulging names of forthcoming PSU stake sales, he confirmed that the issues would be of a far smaller size than NTPC’s.
Mathur said the success of the Oil India and NTPC issues was an indication of the appetite in the market but said the next few issues would be much smaller, including those of MMTC and NALCO.
The OFS route has become the most preferred one for companies looking to dilute the promoter’s stake. The transaction is completed within market hours in a single day in a transparent manner. It is also one of the permitted routes for promoters who want to bring down their holding to comply with the minimum public shareholding norms.