Government to divest 5 per cent in NTPC via OFS

Government owned power major NTPC (National Thermal Power Corporation) in a stock exchange filing informed of selling 5 per cent stake via OFS (offer for sale) route. The floor price for the issue has been set at Rs 122.

The government through the OFS is likely to offer 41,22,73,220 equity shares representing 5 per cent of the total paid up equity share capital of the company on February 23, 2016 for institutional investors and February 24, 2016 for retail and non-retail investor who choose to carry forwards their bids for the same through a separated designated window on both NSE and BSE. The government is looking to raise Rs 5000 crore from the OFS. NTPC is the first company to hit the markets under the revised offer for sale guidelines of market regulator SEBI. The OFS route has now been spread over two days.

20 per cent of the total offer size is reserved for retail investors. Unsubscribed portion of the shares reserved for the retail investors will be allotted to the investors in the non-retail category choosing to carry forward their bids on T+1 and who have not been allotted shares on trading day. Retail investors will be allocated offer shares at a 5 per cent discount to the cut-off price i.e. is price arrived after applying discount to the cut-off prices.

Lead broker for the offer are SBI Caps, ICICI Securities, Edelweiss Securities and Deutsche Equities India.

The Cabinet in May 2015 had approved the 5 percent stake sale in NTPC. The government holds 74.96 percent in the firm. It had last sold stake in NTPC in February 2013. Last month the government had offloaded stake in EIL (Engineers India Limited). NTPC will be the sixth PSU to hit markets in the current fiscal. Others being EIL, Indian Oil Corp, PFC, REC and Dredging Corporation.

The NTPC share sale if successful, will be the biggest divestment by the state in about six months after a USD 1.4 billion equity sale in Indian Oil in August. The Centre has 74.96 per cent stake in NTPC.

The Life Insurance Corp (LIC) has rescued all the major offer sales from government in the past. It is widely expected that LIC will chip in this time too as foreign institutional investors’ appetite has been low due to concerns related to growth prospects of the sate run corporation.

Government in the current fiscal 2015-16 has to revise its disinvestment targets owing to adverse market condition which had made the raising of funds through share sale a difficult task. Government disinvestment targets have also been poorly affected by commodity crash which has made the commodity related company’s way cheaper than their actual value accounted for during the time of budget 2015-16. Recent swings in the stock market have also prompted the government to delay some stake sales as it does not want to sell too cheaply.