The government is set to exceed its 2009-10 disinvestment target of Rs 1,120 crore through the first company that is slated to go to the markets this year — NHPC.
Sources said the government could mop between Rs 1,550 crore and Rs 1,850 crore by divesting 4.5 per cent (of the expanded equity) because it was considering a fairly aggressive price band of Rs 28 to Rs 33 per share. A final decision to this effect will be taken in the meeting of the Empowered Group of Ministers (EGoM) on July 24, government sources added.
The EGoM, headed by Finance Minister Pranab Mukherjee, includes Deputy Chairman of the Planning Commission Montek Singh Ahluwalia and representatives from the administrative ministry concerned — in this case Power Minister Sushilkumar Sinde.
Encouraged by the current market price of its peer group, such as Jaiprakash Hydro Power, and also pricing of the forthcoming initial public offering of Adani Power, which has fixed the price band at Rs 90-100 per share, the department of disinvestment is pushing for pricing NHPC at nearly two times its current book value, which is at Rs 16, much above the expected price of around Rs 20-21 per share that the company was planning last year, sources in the government said.
With the sharp increase in the price, the issue size is expected to increase substantially. NHPC is planning a fresh issue of 1,119.3 million equity shares and offer for sale by the government of 559.1 million equity shares.
At the upper end of the price band of Rs 28-33 per share, the issue size will be Rs 5,500 crore, resulting in a market capitalisation of Rs 40,500 crore. At the lower end, the IPO would raise Rs 4,700 crore, or a market capitalisation of around Rs 34,500 crore.