Selective selloffs on cards

NTPC PUBLIC ISSUE/ Govt to divest 5 per cent stake

Finance minister P Chidambaram said the government will piggy-back on the public issue of National Thermal Power Corporation (NTPC) and disinvest approximately five per cent of its holding.

The NTPC disinvestment and some other cases which are under examination are expected to yield Rs 4000 crore in the current year, he added.

This announcement makes clear the new government's intentions on divestment. Disinvestment will not be an anathema for the UPA government and it will selectively employ this tool to generate revenue.

NTPC, one of the Navaratna companies, has filed a prospectus with Securities and Exchange Board of India (Sebi) to raise capital through a public issue. Chidambaram said, consequently, the government's holding in NTPC would be marginally diluted.

In order to extract value for its holding and to compensate the effect of dilution, the government will go for 5 per cent divestment.

Pashupati Advani, managing director, Advani Share Brokers, said: "It is a positive step but we need to see how it will be implemented." He added that NTPC is a profit making company and the rationale should work well with other profit making PSUs also.

Kamlesh Ratadia, analyst, Enam Securities, said: "The NTPC move by the government is very positive as it increases the available float in the market from 5 per cent to 10 per cent. Larger players like FIIs will be interested in participating in the IPO now."