NTPC divestment offer price likely at 5-6% discount

With the government banking heavily on the NTPC offer for sale (OFS) to meet its Rs 30,000 crore divestment target in the current financial year, the department of disinvestment (DoD) is trying to ensure it is priced attactively.

Around Rs 12,000 crore is expected from the 9.5 per cent government stake sale. A good response will set the tone for speedy disinvestment in other companies.

Sources in the know said the OFS could be at a five to six per cent discount to the closing price on the day the issue is priced.

NTPC’s stock closed on the Bombay Stock Exchange at Rs 159.30 a share on Friday. The expected value of 9.5 per cent of NTPC shares on the day was Rs 12,478 crore.

“Since the pricing is expected to be finalised in the first week of next month, the issue will also be completed in the same week,” said a source from the investment bankers handling the issue.

The Securities and Exchange Board of India (Sebi) has liberalised the norms for OFS and this is expected to perk the disinvestment process in the remaining part of 2012-13. It made the changes in view of the deadline of June 2013 to achieve the minimum stipulated public shareholding for listed companies.

Sebi has allowed institutional investors to place orders without an upfront margin, in line with secondary market practices. However, such bids and orders cannot be modified or cancelled, except for upward revision in the price or quantity.

Sebi has also decided non-cancellable and cancellable orders must be displayed to other investors, to help them know the demand graph. Even indicative pricings based on the orders and bids will have to be displayed through the trading session.

The next round of disinvestment is slated to begin with the Oil India (OIL) OFS by the end of this month. NTPC will follow OIL. Divestment in Minerals and Metals Trading Corporation and Rashtriya Chemicals and Fertilizers would be in March, according to DoD officials. Stake sale in National Aluminium and Steel Authority of India will be in the same month.

The government has collected Rs 6,925 crore from stake sale till now and the OFS in OIL is expected to fetch around Rs 2,500 crore.