The prospect of a revival of the disinvestment agenda has prompted bureaucrats in the power ministry to revive plans for utilities to raise money from the markets, so that the government gains the opportunity to sell its shares.
On the agenda is the revival of an initial public offer (IPO) by NHPC, the hydro-power generator, that was called off in September last year owing to poor market conditions.
The government will “piggyback” on this issue to sell some of its holdings. Investment bankers have been called for a meeting on the issue later this week.
Meanwhile, sources said the ministry would also explore the possibility of further public issues for Power Finance Corporation (PFC) and PowerGrid Corporation, both of which listed in 2007.
| POWER CUT (What’s on the block for NHPC) |
| > 1,677.3 million equity shares at Rs 10 each |
| > Fresh issue of 1,118.2 million shares |
| > Offer of sale by government: 559.1 million shares |
| > Issue size: around Rs 3,000 crore |
Disinvestment in public sector enterprises was put on the backburner during the United Progressive Alliance’s first term, due to strong objections from the Left parties, on which the ruling coalition depended for external support in Parliament.
Barring a few cases in which the government piggybacked its share sales on IPOs, there was no sale of government shares in state-owned enterprises.
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The ministry’s current plans builds on initial moves in 2006, when the government decided to list four power utilities — PFC, PowerGrid Corporation, Rural Electrification Corporation Ltd (RECL) and NHPC.
PFC and PowerGrid completed their IPOs in 2007 and RECL in January 2008. The government piggybacked on PowerGrid and RECL to raise a cumulative Rs 2,000 crore.
For NHPC, sources said the issue needs to be complete before August, since the Securities and Exchange Board of India’s permission will expire by mid-September.
If the issue is not complete before that date, the company will have to file a fresh prospectus, which would not only push up costs in terms of fees paid to the regulator and investment bankers, but would also be time-consuming.
Once a final decision on the timing is taken, sources said it would take 90 days to upgrade the draft red-herring prospectus.
NHPC’s issue was deferred owing to differences over the pricing between the government and investment bankers. With markets plummeting globally — this was the month Lehman Brothers filed for bankruptcy — bankers were asking for the price band to be pegged around the book value of Rs 15.40, against the government demand of around Rs 25 per share.
Sources said that the government was expected to be flexible on pricing this time because it believed more power utility companies needed to enter the capital market. “NHPC’s IPO will set the trend for other companies,” sources said.
“Current market conditions and indications that the government has a larger plan for share sales, since the Left parties are no longer a factor, means NHPC will be attractively priced,” sources said.
Although the pricing is yet to be decided, sources said the issue size would be around Rs 3,000 crore. Of this, the company will receive a little over Rs 2,000 crore and rest will go to the government.
NHPC has appointed three investment bankers — SBI Capital Markets, Kotak Mahindra Capital Company and Enam Securities — for the disinvestment.