The Hindu Business Line : NTPC advice to investors: Read risk factors

Since NTPC does not have significant experience in the new businesses, it is not in a position to assure prospective investors as to the timing and amount of any return or benefits that may be received from the new businesses and any other new businesses the corporation may enter into.

Kolkata , Sept. 27

THOUGH National Thermal Power Corporation (NTPC) is confident of success regarding its ensuing IPO (initial public offer) of equity shares, the management of NTPC has advised the prospective investors to carefully study the risk factors involved in the IPO.

This has been suggested because NTPC has plans to diversify its operations in the power trading business. It also has plans to integrate into the electricity distribution business, notwithstanding the fact that it is keen on entering hydroelectricity power and captive coal mining.

These new businesses, coupled with the regulatory environment, may pose significant challenges to the company's administrative, financial and operational resources. The early stage and evolving nature of power sector reform and the company's diversification programme make it difficult to predict competition and consumer demand.

Since NTPC does not have significant experience in these new businesses, it is not in a position to assure prospective investors as to the timing and amount of any return or benefits that may be received from the new businesses and any other new businesses the corporation may enter into.

This apart, the Electricity Act, 2003, provides opportunities for increased private sector involvement in power generation. The Tatas and the Reliance group, among others, which already have a presence in the power sector, may seek to expand their operations in the sector. Besides, the sector could attract increased investment from multinational companies.

Even after the completion of the IPO, comprising a net issue of 84.52 crore equity shares of Rs 10 each, at a band price between Rs 52 and Rs 62 per share, the Union government will control nearly 89.5 per cent of the total paid-up equity share of the corporation.

Explaining a series of risk factors involved in the IPO, which opens on October 7, the NTPC's Director (operation), Mr Chandan Roy, here on Monday said that the entire issue was being made through a 100 per cent book building process wherein up to 50 per cent of the net issue to the public would be allocated on a discretionary basis to qualified institutional buyers, not less than 25 per cent would given on a proportionate basis to non-institutional bidders, and not less than 25 per cent would be available on a proportionate basis to retail individual bidders.

Up to 2.06 crore equity shares would be available for allocation on a proportionate basis to the employees.

Mr Roy said that NTPC, with a total installed capacity of 21,435 MW, was at present operating through 13 coal-fired power stations and seven gas-fired power stations. It operated 314 MW of capacity through three joint venture projects and managed 705 MW owned by the government.

He said that NTPC had plans to double its generating capacity to become a 40,000-MW company by 2012, adding 9,370 MW in the Tenth Plan (of which 2000 MW had already been commissioned). Further projects totalling 8,490 MW were under implementation and a capacity of 5,080 MW was under tendering. The funds raised through the fresh issue would be used to fund the equity component of the capacity expansion programme.

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