LIC buys 59 pct of NTPC shares on offer

MUMBAI/NEW DELHI (Reuters) - State-owned Life Insurance Corporation of India bought more than half of the shares being sold by the government in power utility NTPC Ltd, the latest instance of the insurer playing a key role in a government sale.

India was selling 5 percent of NTPC as part of its asset sales programme, which is crucial to contain the budget deficit. The government is due to unveil its fiscal budget for 2016-17 on Monday.

Life Insurance Corporation (LIC) ended up buying 59 percent, or 243.15 million of the 412.27 million shares on offer, taking its stake in India's biggest power producer to 12.98 percent, according to an exchange filing on Friday.

LIC is India's biggest portfolio investor and plays a major role in government stake sales, sometimes stepping in when demand is weak.

Analysts, however, said overall institutional demand for the $730 million stake in NTPC on offer, including from foreign investors, had been strong, and did not believe LIC had to step in to ensure the success of the sale.

The portion of NTPC shares reserved for institutional shareholders saw bids worth two and a half times the shares on offer, according to stock exchange data.

"There is no question of rescuing NTPC," said Rahul Dholam, an analyst at Angel Broking.

"NTPC is a blue-chip company and none of the institutional investors would be able to purchase the stock in bulk if they go and buy it from the secondary market, so it was obvious that everybody was going to subscribe to it and the pricing was quite decent."

In August, LIC salvaged a $1.4 billion sale of shares in Indian Oil Corp, and previously supported the sale of shares in Coal India, Steel Authority of India and state banks.

The insurer did not immediately reply to an email seeking comment on the NTPC sale.

Fund managers said demand for public sector companies remained poor.

"The environment is fairly weak right now. Most investors don't want to buy into these companies. The quarterly results these companies are reporting are weak," said Nilesh Shetty, a fund manager at Mumbai-based Quantum Asset Management.

(Reporting by Devidutta Tripathy, Tommy Wilkes and Aastha Agnihotri; editing by Rafael Nam and David Clarke)