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Institutional investors lap up shares in NHPC offer for sale

( 13:00, 28-Apr-16)

The government’s disinvestment drive for fiscal 2017 got off to a positive start with the two-day secondary market offering of state-owned hydropower producer NHPC Ltd seeing massive demand from institutional investors.

The 11.36% stake sale in NHPC, comprising 1.25 billion shares, is the first disinvestment for the financial year. The offering saw bids from institutional investors at 1.56 times as of 3.30pm on Wednesday. Nearly 1.57 billion shares were bid against 1 billion reserved for institutional investors, data from stock exchanges showed.

Almost all (99%) of the shares were bid at the floor price of Rs.21.75 per share, data showed.

A top official at Life Insurance Corp. (LIC) of India confirmed participating and subscribing to a large quantum of shares in the NHPC offering, without divulging the exact quantum of bids.

The insurance behemoth, through its schemes, currently owns a 3.44% stake in NHPC, stock exchange data showed.

Retail investors, who have 20% of the offer or 251.52 million shares reserved for them, will get to partake of the action on Thursday, as per NHPC’s stock exchange filing on Tuesday.

Edelweiss Securities Ltd, HSBC Securities and Capital Markets (India) Pvt. Ltd and IDFC Securities Ltd are managing the NHPC stake sale.

Shares of NHPC declined 6.51% from the previous day’s close to Rs.21.55 apiece on BSE on Wednesday. The stock touched a high of Rs.24.40 and a low of Rs.15.55 per share in the past 52 weeks.

NHPC’s shares have never traded above its initial public offering (IPO) price except on the day it debuted on stock exchanges in September 2009. The government had sold the shares at Rs.36 apiece through an IPO, Bloomberg data showed.

With strong institutional participation on Wednesday, the government is assured of receiving at least Rs.2,700 crore from the offer for sale (OFS), which will also bring its stake down to 74.6% from the 85.96% it held at the end of March.

NHPC will then be compliant with the Securities and Exchange Board of India’s (Sebi’s) minimum public shareholding norms, which mandate all public sector units, excluding state-owned banks, to have at least 25% public shareholding.

Sebi’s minimum public shareholding norms for PSUs was introduced with a view to promote a wider investor base in state-run companies and also provide a boost to the government’s plan to raise funds through its disinvestment programme.

Currently, 20 publicly traded state-run companies have a promoter holding of more than 75%, according to data compiled by Capitaline, a corporate database provider. These companies have time till August 2017 to be compliant with Sebi’s norms.

Previously, publicly traded state-run companies were required to have at least 10% public holding.

The Union government will generate Rs.24,000 crore at current stock prices if it were to cut its stake to 75% in these companies, data showed.

The centre aims to raise Rs.56,500 crore by selling stakes in state-owned enterprises in 2016-17, out of which Rs.36,000 crore will come from minority stake sales andRs.20,500 crore from strategic stake sales. This is 19% lower than last year’s target.

For FY16, the government had set a record target of raising Rs.69,500 crore through disinvestment comprising Rs.41,000 crore by way of minority stake sales and an additional Rs.28,500 crore from strategic sales.

The centre later trimmed its target by roughly 57% to Rs.30,000 core, citing volatile market conditions. However, the amount garnered was even lower.

Source - Live Mint

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