Govt begins process to sell 10% in NTPC, 4 banks to manage offer

Mumbai: The government has set the ball rolling for selling a 10 per cent stake in power generating utility NTPC. Four merchant bankers including Citigroup, Jefferies, Axis Capital and Yes Bank have been shortlisted to manage the proposed share sale through which the government plans to raise roughly Rs 13,000 crore, said bankers in the know.

The government currently holds a 69.74 per cent stake in NTPC. At the market price, a 10 per cent stake sale in the thermal power company would fetch the exchequer about Rs 13,300 crore, which will be the biggest divestment by the government so far in 2017-18. The market capitalisation of NTPC was Rs 1.33 lakh crore on Tuesday.

Though the government has not finalised the timing of NTPC, bankers expect the offer to be announced anytime soon. Nearly a dozen merchant bankers had made presentations before the fin a n c e m i n i s t r y officials last week, out of which four were selected.

NTPC shares, which gained 3.17 per cent to Rs 161.30 on Tuesday, have declined about 2 per cent so far this year.

Analysts said the weakness in the stock is because of the upcoming share sale.

“The weakness in stock due to follow-on-offer is a good buying opportunity for a stock with a reasonable valuation (1.2 times FY18 P/B), good growth (20 per cent PAT and regulated book) and ROE expansion of 300 bps to 14.5 per cent by FY19,” said Abhishek Puri, analyst, Deutsche Bank. The government has budgeted to raise Rs 72,500 crore through divestment in public sector units in 2017-18. It plans to raise about Rs 45,000 from divestment, Rs 15,000 crore from strategic sales and Rs 11,000 crore through the listing of insurance companies. So far this year, the government has raised about Rs 1,200 crore by selling 9.2 per cent stake in Nalco.