The Hindu Business Line : Govt plans to disinvest 5.25 pc stake in NTPC

The sell-off is set to ride piggyback on the ongoing process by NTPC to float an initial public offering (IPO) amounting to 5.25 per cent additional equity in the power generation company. Together, the float would be for 10.5 per cent equity.

The Disinvestment Department has recently written to the Power Ministry regarding the 5.25 per cent disinvestment through the retail route, a senior Disinvestment Department official told Business Line. The 5.25 per cent disinvestment of Government equity is expected to yield around Rs 2,000 crore, assuming a premium of around Rs 40-50 per share. This will mark the first divestment of government equity in the current fiscal.

According to department officials, NTPC would require to revise the draft red herring prospectus that was recently filed by the power major with the market regulator, SEBI, for a public issue of 5.25 per cent additional equity in the company. The public issue of fresh equity is aimed at funding NTPC's generation capacity addition programme.

NTPC had, late last year, taken Government approval to enter the market capital with an IPO for 10 per cent equity, with the proposed fresh issue of capital aimed at funding new projects. It finally decided to go ahead with a market offering of only 5.25 per cent.

The Disinvestment Department has not yet set any sell-off targets this year. Last year, against a target of Rs 14,500 crore, the Government mopped up Rs 15,400 crore. The bulk of this came through issue of minority stakes in the retail market. Sale of 10 per cent equity in ONGC fetched the Government 10,534 crore while another 10 per cent in GAIL (India) Ltd netted the exchequer Rs 1,600 crore.

Interestingly, the Government and NTPC have maintained that the IPO is essential to meet the power company's resource gap during the Tenth Plan period in pursuit of its capacity addition target of 9370 MW. However, the draft red herring prospectus filed by NTPC with the market regulator may indicate a slightly different position, industry analysts said.

According to the prospectus, the capital expenditure during the Tenth Plan has been estimated at around Rs 41,522 crore, while the capacity addition is estimated at 9370 MW.

During the first three years of the Plan period, NTPC has spent only Rs 13,000 crore. Although the capital expenditure is expected to mount during the Plan's terminal years, it is almost certain that the expenditure will be well within the Tenth Plan estimates. All this while the company is set to meet its capacity addition target.

Since the company does not forsee any resource constraint during the Eleventh Plan period, the need for an IPO to fund the capacity addition is debatable, point out analysts.

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