NTPC dips as stake sale begins

The stock dipped 3% to Rs 122.60, extending previous day's 2% fall on the BSE.

Shares of NTPC has dipped 3% to Rs 122.60, extending previous day’s 2% fall on the BSE, after the central government said that it will divest 5% stake in power giant through the Offer for Sale (OFS) route, which begins today.

“The government proposes to sell up to 412 million shares of the company on February 23, 2016 (for non-retail investors) and February 24, 2016 (for retail investors and for non-retail investors who choose to carry forward their bids),” NTPC said in a statement.

It has fixed the base price at Rs 122 a share. Retail shareholders will get an additional discount of 5% over their bid price, implying a floor price of Rs 116. A minimum of 20% of the issue is reserved for retail investors.

Angel Broking recommends investors to subscribe for NTPC shares in the OFS.

“We like NTPC for the growth offered by its regulated equity model, huge capacity addition plans and expected improvement in demand for power in the country. At the OFS price of Rs 122, the stock is available at an FY2017E EV/EBITDA of around 8.3x and P/E of 9.2x FY2017E EPS estimate of Rs 13.3. Retail shareholders will get an additional discount of 5%, implying an OFS floor price of Rs 116,” Angel Broking said in a client note.

We remain positive on the stock with a target price of Rs 146, based on around 1.3x FY2017E BV, implying a 20% upside from the OFS floor price (26% for retail investors), it added.

At 10:00 AM, the stock was down 1.7% at Rs 125 on the BSE. A combined 1.9 million shares changed hands on the counter on the BSE and NSE so far.