NTPC's share auction of about Rs 11,500 crore on Thursday saw good demand from investors, helping the government move closer towards meeting the Rs 30,000-crore disinvestment target for this financial year and reducing its fiscal deficit.
Through the offer for sale (OFS), the government sold 9.5 per cent, or 783 million shares, in the country's largest power utility and raised about Rs 11,500 crore at about Rs 146 a share (the average price of most bids).
On Thursday, the issue attracted bids for about 1.3 billion shares, worth about Rs 20,000 crore, about 1.7 times the shares on offer. The offer saw demand across investor categories, with equal bids from domestic, as well as foreign institutional investors (FIIs), said investment bankers handling the offer.
The auction was the biggest since last year's Rs 12,750-crore ONGC share auction. It follows last week's Rs 3,100-crore share sale in Oil India and the Rs 6,000-crore share sale in mining company NMDC in December.
"The market has never seen this kind of demand for such a large block transaction in a single day. The road shows conducted by the finance minister to attract investors across the globe, coupled with attractive pricing, have made the issue successful," said V Jayasankar, head of equity capital markets, Kotak Investment Banking.
Venkatraghavan S, director (investment banking), IDFC Capital, said, "The government has handled recent share sales in a much better way. The way it has priced and timed the offerings has led to such good response."
For the NTPC OFS, the government had fixed the floor price at Rs 145 a share, a five per cent discount to the market price. On Thursday, NTPC shares closed at Rs 147.7 on the National Stock Exchange (NSE), down 2.7 per cent, against the Nifty's 0.34 per cent fall.
Most brokerages had advised clients to bid for the shares of NTPC, which has power generation capacity of about 40,000 Mw.
The indicative pricing for the NTPC auction was about Rs 146 a share, according to the NSE website. For about 53 per cent of the bids, investors didn't make any upfront payment; for the remaining bids, full upfront payments were made.
Morgan Stanley, Citigroup Global Markets, Goldman Sachs, Deutsche Equities, Kotak Securities and SBICAP Securities are the investment bankers for the offering. To market the offer, each banker met 15 institutional investors, including five domestic, said a banker handling the issue.
Experts said the recent changes by the Securities and Exchange Board of India in the framework for offers for sale---allowing bids without any upfront payment and introducing more transparency---were helping draw more investors to such auctions. So far this financial year, funds raised through stake sales in state-owned companies stand at about Rs 21,500 crore, including the proceeds from the NTPC offering. To meet its targeted amount, the government is likely to raise the remaining Rs 8,500 crore by selling shares in other companies---SAIL, MMTC, National Aluminium Company and Neyveli Lignite.