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Govt plans to divest 4.75 pc stake in NTPC via IPO

by praveen
August 31st, 2007

Trough the public offer it expects to raise around Rs 6,000 crore

NTPCNew Delhi, Aug 30: India’s biggest power generation facility, National Thermal power Corp (NTPC) will soon see major change in its shareholding pattern. The government plans to divest 4.75 percent of its stake in NTPC Ltd, through a public offer that could fetch it nearly Rs 6,000 crore. Power Ministry, acting on a request from the state-run firm has approached the Department of Disinvestment in Ministry of finance for approval of a Follow on public offer (FPO) of 4.75 percent shares, offer sources said.

In February 2004, the government allowed NTPC to go for an IPO of 10 percent of its paid-up capital in one or more stages to augment resources. The company chose to go for an IPO of 5.25 percent, leaving balance 4.75 percent of approved IPO for later date. Subsequent to the offer, government shareholding in NTPC fell to 89.5 percent from 100 percent.

While the IPO in 2004 was pieced at Rs 62 to raise about Rs 5,400 crore, the company’s current share price is hovering at Rs166. Based on thid price, the government could get about Rs 6,000 crore with the new offer of around 35 crore shares. After the FPO, government shareholding in NTPC would come down to 84.75 percent from the present level of 89.5 percent. Sources said NTPC has stated that the visibility of the company among foreign equity invourable impact on debt investors. This would result in reduction in the cost of borrowing would, in turn, result in lower capital cost and consequently a lower tariff for consumers.

NTPC stated that it did not find it appropriate to increase the equity base through fresh issue as it already had the highest paid up capital among the listed companies in the country. Besides, any increase in share capital would reduce the earning per share (EPS).

Further, the projections made for funding the future capital expenditure requirements indicate that internal resources of the company were adequate, NTPC said suggesting government divestment of its stake in the follow-on offer.

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