NEW DELHI: The government has priced the followon public offer of NTPC at Rs 201 per share, at a 5% discount to Monday’s closing price, hoping to attract individual investors who showed a lack of interest in some of the high-profile offers that hit the market in recent months. ET NOW was the first to announce the price of the follow-on offer.
The discount may ensure better participation of retail investors who enjoy a quota of 35%, said bankers. “In case the market price holds at the current level of Rs 211 and above, it will have good response from retail investors. This, in turn, could increase the auctioning price,” said a banker, who asked not to be named. Another 15% of the issue is reserved for high net worth individuals.
The government will mop up a minimum of Rs 8,286 crore from the sale of 41.22 crore shares, representing 5% of the existing paidup capital of NTPC, India’s largest power producer. The proposed offer will open for subscription on February 3. Since this is the first issue through the French auctioning route, the government mobilisation may go up significantly . Half of the issue will be sold through auctions.
The price is significantly lower than the government’s expectation of around Rs 265 per share. The government was hoping to raise Rs 11,000 crore from NTPC sale.
The previous two issues from state-owned companies failed to elicit a good response from retail investors, though they received an overwhelming response from institutional investors. The retail portions of Oil India and NHPC issues were subscribed only 1.76 times and 2.97 times, while the issues were oversubscribed 31 times and 24 times, respectively.
At the time of giving the mandate, bankers had assured the government that they would be able to sell the shares at Rs 250 per share or above, provided the market remained bullish, said a senior NTPC official.
On Monday, the bankers recommended a discount of 8% to the current price of Rs 211 per share. Based on the recommendations of the four bankers, the empowered group of ministers (eGoM), which met on Monday evening, agreed to give a 5% discount to the current market price. “NTPC issue should not be equated with recent public offerings of other power companies that failed to make major gains in trading. The company’s shares have been in the market for some time and has given good returns to investors,” said the government official quoted earlier.
NTPC last tested the market with its initial public offer in October 2004. That time the public offer involved issue 5.25% of fresh equity shares and sale of equivalent (5.25%) number of shares held by the government. The issue raised over Rs 5,000 crore.
Post-issue, the government holding in the company came down to 89.5% of the expanded capital of the company, which will come down further to 84.5% after the proposed sale. NTPC, which has an installed capacity of over 31,134 mw, is expected to add another 22,000 mw by March 2012.
Source: ET BureauCourtesy economictimes.indiatimes.com
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