Along with a 5% disinvestment in National Thermal Power Corporation (NTPC) through a follow-on public offer, the panel paved the way for an IPO by Satluj Jal Vidyut Nigam Ltd. The Centre will shed 10% of its stake in SJVNL, a 75:25 joint venture with the Himachal Pradesh government with a paid up capital of Rs 4,109 crore. The state governments share will remain unchanged.
NTPC, which was listed on the stock exchanges in October 2004 through a 10% stake sale cleared by the NDA government, is currently quoting at around Rs 214. After the 5% dilution, the government's holding in NTPC will drop to 84.5% and fetch it around Rs 8,800 crore. It is expected that the market capitalisation of NTPC would be higher and it would help the company to raise resources in the international market on competitive terms, said commerce & industry minister Anand Sharma after the CCEA meeting.
To make it inclusive and participatory, part of the shares would be offered to the employees of the state-run firms, Sharma said. Power secretary HS Brahma told PTI that the FPO could be expected by December.
Since August, the government has successfully raised $1.8 billion through the IPOs of NHPC and Oil India, but these were cleared during the UPAs first term. NTPC and SJVNL are the first stake sales approved under UPA-II. The latest Economic Survey projected revenues of up to Rs 25,000 crore a year from such sales in the next five years.
The government is confident about the recovery in the market and the economy, which is why it is going ahead with its divestment plans. The market is expected to react positively to the news and it indicates a rally in the days ahead, said Geojit BNP Paribas Financial Services research head Alex Mathew.
The government has reaffirmed its more liberalised economic policy and is committed to increase investors' wealth. However, the move would not add any value to the company's financial position, said Kotak Mahindra Mutual Fund equities head Krishna Sanghvi. An FPO of NTPC, the second-most valued PSU with a market cap of over Rs 1.77 lakh crore, would help increase trading volumes at the counter.
The CCEA on Monday approved the FIPB-cleared proposal of Norway's Telenor ASA for a 74% stake in new telecom licensee Unitech Wireless. Telenor had last October picked up a 60% stake in Unitech Wireless for Rs 6,120 crore, which earlier this year it raised to 67.25% for the same amount. Up to 49% foreign investment in telecom is allowed via the automatic route, but anything above that to the maximum permissible 74% requires FIPB approval. Any deal above Rs 600 crore further requires CCEA nod.