Institutional investors may save the day for NTPC FPO

Institutional investors such as insurance companies, mutual funds and foreign institutional investors may help the Rs 8,300-crore follow-on public offer (FPO) of utility major NTPC sail through. The issue opens tomorrow.

Late on Monday, the government set the floor price at Rs 201 per share. The issue closes on February 5. At the floor price, the government would raise Rs 8,300 crore by selling 412 million shares.

This will be the first issue to use the auction route. Under this, institutional investors can bid at above the floor price and get the desired number of shares at the price that they bid. Retail and high net worth individuals will be allotted shares at the floor price.

There are concerns among investors over pricing and whether the issue will sail through. This is because the stock price of NTPC has fallen almost 10 per cent in the last two weeks.

Officials at leading broking firms and fund houses said initially there were concerns over the issue. But, they said, the floor price of Rs 201 was good and the issue would sail through.

“It is a good issue and we will apply,” said the chief investment officer of an insurance company who declined to named. He said anything up to Rs 10 to the floor would be a good price. An official of a domestic mutual fund owned by a public sector bank said the NTPC issue was good as they would be able to get a large number of shares without impacting the price.

Brokers catering to institutional investors said the issue would sail through. “NTPC is an index stock and the company is also good. I think the issue will sail through,” said Dharmesh Mehta, head, broking, Enam Securities. He said the recent fall in the stock price was factored into the floor price.

However, there is not much interest from retail investors. “There is no interest from my clients and so far nobody has come even to collect the application forms,” said Sunil Maheswari, a sub-broker catering to retail investors. He said the market price was too close to the FPO price. NTPC’s stock closed at Rs 205.80, down 2.6 per cent, on the National Stock Exchange today.

Another reason for the muted interest shown by retail investors is that most recent initial public offers, especially from the power sector, barely gave returns. IPOs of JSW Energy, Adani Power are trading marginally above their issue prices while NHPC and Indiabulls Power are trading below their issue prices. The retail portion of real estate company DB Realty, which closed today, was undersubscribed.