In a follow on public offer, the cabinet has announced a 5% divestment inNTPC. The government’s stake would now reduce to 84.5% from 89.5% earlier post this divestment.
Commenting on the divestment plans for the power major, Yogesh Kapoor of Enam Securities said that theinvestors were likely to look at the NTPC divestment favourably and that the government was making calibrated moves for PSU divestments. He added that it was too premature to comment on the NTPC FPO allotment or the pricing for the offer.
Earlier, RS Sharma, CMD of NTPC, clarified that there would indeed be no fresh issue of shares from NTPC and Mr Sharma is also quite confident of a strong response this time. The thing is that 5% will go into the market that shall certainly give liquidity in the market so it will certainly help that so that’s one aspect. So far as NTPC is concerned it is going to be excellent.
Here is a verbatim transcript of Yogesh Kapoor’s exclusive interview on CNBC-TV18. Also watch the accompanying video.
Q: Enam was involved with NTPC’s IPO which came in 2004, it was quite successful and a money making exercise for public as well but now in the past we have seen power Initial Public Offering (IPOs) not doing too well like Adani and NHPC- what is your own sense of valuation of this space and the power IPOs.
A: I think as far as power IPOs are concerned, if one looks at the NHPC IPO, I think the IPO was fairly priced and we have to appreciate the fact that NHPC kind of companies are well tracked companies with strong base with about 5,500 megawatt capacity in place. 5,000 MW plus is already in execution mode.
So these are matured profitable companies and they will come at fair valuations; not cheap, nor expensive. The government and bankers have been very proactively looking at the valuations and looking at fairly pricing these. Leaving aside short-term aberrations in the market price, these transactions should do well going forward.
Q: What is the quantum you think that the government could raise by the end of FY10 and which companies do you think would be at the forefront of this divestment plan now?
A: It is very difficult to pinpoint, which companies will go for the listing and for follow on offerings from the governments stable. The way we are seeing and the trends are indicating I think government is making a much calibrated move in terms of selecting each company very-very carefully. So these will be very company specific decisions. There will be various factors in terms of valuations of these companies, the visibility on their performance going forward.
As you see, NTPC, which has a very successful track record of operations, has a huge growth potential, visibility is very strong the government obviously will be very keen to divest and they have decided to divest 5%. Investors will look at this transaction very-very favourably because it is only 10% which is in the public adjusting capital and long term investors will be looking at it pretty much favourably to participate in the stock.
As far as other transactions are concerned, I think it is for the government to take a decision on each case. One keeps hearing about a lot of companies whether it is Coal
Q: The government will be coming out with a lot of IPOs and I think Enam will be involved with a few of them. From the NHPC experience, there is a talk in the market that there could be a proposal to reserve the NTPC follow on issue for reserve maybe about 70-80% of that just for retail public and give them a bit of a discount so price it sub-Rs 200; you think that is something that is one line that government can adopt?
A: I think it is too premature to figure out as to how the follow on offering will be distributed among the various categories of investors. Whether it is institutional investors or the retail or the HNIs, but I think by and large government is quite keen that the new transactions that are happening in the government companies which are going public they should be widely distributed and there should be a very good participation from all categories of investors so it will be a balance between institutional and non-institutional investors. So I do not think there will be very heavy buyers in favour of one segment and all will be allowed to participate in terms of discount etc and exact sharing. The government will actually see what the regulatory framework is and to what extent they have flexibility and I am sure within that the government will do its best to offer a fair value to retail and non institutional investor also.
Q: We have seen that in case of NTPC there will only be FPO and in case of Sail the company will come out with fresh share issue also. So going forward do we see from the government’s stable a mix of FPOs and also companies coming out and raising money?
A: Absolutely, it will all be very company specific decision and government is aware of the fact that there are companies which will need money for their own operations and growth and I think that is how the government creates value in these companies by allowing them to raise capital, grow their businesses.Rural Electrification Corporation (REC) is an example where government has already taken a decision, where in fact the largest chunk is going towards the primary offering by REC and a smaller component is going through a secondary sale. So those will be the decisions taking in each case, looking at the company requirements as well as government tagging along and divesting some of its share and creating value for the investors all across.
Q: Specifically for NTPC how do you see valuations looking now- do you think the FPO will be offered at a discount considering the past and how aggressively they were priced earlier?
A: It is too premature to talk about the discount in NTPC but it’s a large offering. And at the same time it is a company with a very well tracked, has rewarded shareholders right from the first listing in 2004. I am sure government will keep investors interest in mind while pricing the offering but it would be too premature to indicate as to how the pricing will work.
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