Pricing not reason for poor show of NTPC FPO: FinMin

The Finance Ministry has said pricing of the recent NTPC follow-on-public offer (FPO) cannot be blamed for the poor response from retail investors.

The just concluded NTPC issue almost drew blank from the retail investors front, which analysts blamed on high pricing of the issue. NTPC had fixed the base price for the offer at Rs 201 a share, about 5 per cent discount on the closing price of Rs 207.95 on the Bombay Stock Exchange (BSE) that day.

Revenue secretary Sunil Mitra, who was earlier disinvestment secretary said, "We think the pricing (of NTPC issue) was good; don't think the pricing was high."

The secondary issue from the country's largest power utility opened on February 3 and closed on 5 and scraped through with institutional buyers as retail investors kept off.

Mitra said, "Retail showing was poor, that I can say... But, I think pricing was good."

The revenue secretary, however, said the issue raised Rs 8,500 crore, more than three times of Rs 2,700 crore it mopped up last time (in 2005) when around same number of shares were divested. The government divested 5 per cent stake in NTPC.

The NTPC offer just got 0.14 per cent of retail subscription, while high networth investors subscribed just 0.39 times the shares reserved for them.

Many experts put the blame for poor retail response on the pricing of the issue.

When asked whether bears hammered the NTPC share, Mitra said, "The NTPC, you know, in mid-January was trading at Rs 235, it went down. Now whether that was some bear action or not, it is something which disinvestment department will look at."

However, the Qualified Institutional Buyers portion of the FPO was over subscribed 2.18 times.

To a query on whether pure auction route would be given up for the issues such as NMDC and SJVNL Mitra said, "That is for disinvestment secretary to say."

Pure auction route taken for NTPC and REC, differs from the prevalent practice of giving shares on book building route, which gives a price band to investors.

On the other hand, in the book-building route a price band is given, and even non-institutional investors get shares at price where maximum bids are received.

When asked whether as the Revenue Secretary, he has an idea whether pure auction route would be dispensed with for the coming issues Mitra said, "No, no, there is no question of revenue side. The question is... We would like to maximise our returns, at the same time we would want the widest possible public ownership."