LIC stars in NTPC stake sale show

Rs 5,000-crore share sale sees bids of over Rs 7,000 crore

The Rs 5,000-crore stake sale by the government in NTPC saw demand for almost twice the shares on offer, led by a big-ticket application by state-owned insurance giant Life Insurance Corporation of India (LIC).

The 330 million share offering, excluding the 20 per cent retail quota that will be auctioned on Wednesday, received 596 million bids, with nearly a fourth of them from insurance companies, mainly LIC.

Most of the bids came in at around Rs 122.2 per share compared to the base price of Rs 122 set by the government. Despite weak market conditions, NTPC’s offer for sale was fully subscribed within hours. The sale saw participation from all categories of investors, including foreign ones, said Disinvestment Secretary Neeraj Gupta. “In the current environment, this is a good response from the market,” he said.

Gupta said foreign institutional investors placed bids worth Rs 925 crore, while mutual funds and banks applied for shares worth over Rs 440 crore each.

Insurance companies were responsible for 133 per cent of the bids and LIC made an application worth around Rs 3,000 crore, he added.

NTPC is the second-biggest disinvestment in the current financial year after the Rs 9,370 crore stake sale in Indian Oil Corporation (IOC) in August 2015. LIC, known as the white knight in government disinvestments, had bought nearly 90 per cent of the IOC shares on offer.

Including proceeds from NTPC, the Centre has a mopped up a disinvestment kitty of Rs 18,344 crore in 2015-16.

The 20 per cent retail portion of the NTPC issue will be auctioned on Wednesday. Retail investors are being offered a five per cent discount on the allotment price. If the retail portion remains unsubscribed, the shares will be allotted to non-retail investors.

SBI Cap Securities, ICICI Securities, Edelweiss Securities and Deutsche Equities are the investment bankers in the NTPC stake sale.

Investment bankers said investors were attracted by NTPC's valuation and dividend record. NTPC trades at 10.5 times its estimated 12-month earnings and offers a dividend yield of 2.6 per cent.

Shares of NTPC are down around 15 per cent so far this year. The 12-month price target on NTPC is Rs 158, according to consensus analysts’ estimates provided by Bloomberg. The stock has total 28 ‘buy’ recommendations and five ‘sell’.

Shares of NTPC closed at Rs 123.9, down 2.33 per cent on Tuesday, on BSE.