NTPC's 5% float to raise Rs 1,500 crore

The Union Cabinet, which met yesterday, cleared a proposal for an initial public offering (IPO) by National Thermal Power Corporation.

The power major will offload 5 per cent of its equity to raise about Rs 1,500 crore in the next financial year, against an original plan to sell a 10 per cent stake.

According to government sources, NTPC will now have to go in for a vanilla equity issue and not the dividend differential offer envisaged earlier. "It was felt this was not the right time for a dividend differential offer," said a source.

NTPC, which plans to raise $200 million through a eurobond issue this month to meeting capital expenditure for new and ongoing projects, is required not to undertake any publicity for two months by the Singapore Stock Exchange, where the bond is to be listed. "The issue is being launched in February. The non-publicity clause starts today and will end on April 5," the source said. NTPC can initiate its domestic IPO process only after that.

Eurobonds are borrowings through bonds outside the US but are denominated in dollars.

The merchant bankers for the bond issue, ABN Amro and Merrill Lynch, have completed the due diligence process and the offering circular is in the draft stage.

NTPC's public issue had run into rough weather with both the finance and disinvestment ministries opposing it. The finance ministry had said the company could better leverage its equity to raise debt and the disinvestment ministry favoured a strategic sale. The Cabinet finally decided to let NTPC float an IPO on representations from the power ministry that the company needed to tap the stockmarket to widen its base.