Investor response to FPO could decide fate of sell-off this fiscal
NTPC has launched roadshows to attract potential investors to its public issue for partial sale of government stake in the company. The government is expected to mop up R12,000-13,000 crore by selling a 9.5% stake in the power generation major.
The government’s disinvestment programme in the previous fiscal was a lacklustre affair, with the actual mop-up falling well short of the halfway mark of the target. There is huge pressure on the finance ministry officials to meet the target this time given the urgency of containing the fiscal deficit.
So far, the government has raised just R7,000 crore from stake sales in Hindustan Copper and NMDC against the annual target of R30,000 crore. With just two months left in this fiscal, the success of NTPC’s issue will be crucial to meeting the government’s target for this year.
Competitive pricing was a key factor behind the success of NMDC?s follow-on offer in December. The market expects discounts in sales of NTPC?s stock too. It has already conveyed this message by hammering down the NTPC shares.
The cabinet granted its nod for stake sale in the company on November 22. NTPC’s share had closed at R163.70 a piece on that day on the BSE. The next day, the share closed at R159.50 a piece on expectations of discounts in the company?s FPO. Price for NTPC?s share remains depressed since then.
But in contrast with its lacklustre stock market performance, NTPC’s physical and financial achievements remain impressive. The company reported 22% growth in its net profit for the third quarter (Sep-Dec 2012).
The company has added 2,660 MW capacity in the current financial year up to December end. During the same period, it generated 171 billion units of electricity, up from 161 billion units produced in the same quarter previous year.
The average plant load factor (PLF) for NTPC?s coal-fired plants stood at 81.77% between April and December 2012, compared with the All-India average of 69.63% for the period. The average tariff for NTPC?s plants worked out to R2.98 a unit.
The company has signed additional power purchase agreements for over 40,000 MW on a cost-plus basis. So the company has enough projects in hand to care about growth for the next seven-eight years. By virtue of that, the PSU is expected to maintain its industry leadership in the foreseeable future.
The coal ministry has recently restored allocation of three cancelled captive coal block linkages?Kerandari, Chatti Bariatu and Chatti Bariatu (South)?giving a big boost to the company?s effort to ensure fuel security for its envisaged power plants.
India?s largest thermal power generator has also taken key steps like diversification into clean and renewable energy sources to reduce its dependence on coal-fired generation, a major source of green house emissions.
The R1.9-lakh crore debt restructuring scheme unveiled by the Centre recently for state-owned power distribution companies is expected to help improve discoms? cash flows. This is a positive development for NTPC given that discoms’ are its customers.
If investors response to NTPC?s forthcoming FPO is positive, the government might expedite plans for stock sales in other CPSUs.