The central government will divest five per cent stake in power giant NTPC through the Offer for Sale (OFS) route on Tuesday, as part of the 2015-16 disinvestment plan.
It has fixed the base price at Rs 122 a share. The NTPC shares ended on Monday at Rs 126.85, down two per cent from Friday, as against a 0.3 per cent gain in the benchmark Sensex.
The Centre has 74.96 per cent stake in NTPC and will sell 412 million shares, a fifth of these being reserved for retail investors (those putting in up to Rs 2 lakh).
The earlier government divestment, a successful one, was late last month in Engineers India. So far in 2015-16 (ending March 31), the government has divested stake in five companies and has raised a cumulative Rs 13,300 crore.
NTPC’s share sale will be the second-biggest divestment after Indian Oil Corporation, which had helped the government mop up over Rs 9,370 crore.
SBI Cap Securities, ICICI Securities, Edelweiss Securities and Deutsche Equities are the investment banker handling the share sale. The NTPC share sale comes at a time when investor sentiment is low. So far this year, the benchmark Sensex is down nine per cent and overseas investors have pulled out nearly $2.5 billion from stocks.
Shares of NTPC are down 13 per cent so far this year. The 12-month price target on NTPC is Rs 158, as per the consensus analysts estimates provided by Bloomberg. The stock has total 28 ‘buy’ recommendations and five ‘sell’. NTPC trades at 10.5 times its estimated 12 month earnings and offers a dividend yield of around 2.6 per cent.
Retail investors are being offered a 5 per cent discount in the OFS on allotment price. Following a recent rule change, shares in retail category will be auctioned on Wednesday. Non-retail investors will have an option of carrying forward their bids. In an event of shortfall in retail bids and oversubscription in non-retail bids, investors who have carried forward their bids will get a chance of allotment.