NHPC will launch the country’s biggest IPO since the economic downturn started

By Administrator

India’s National Hydroelectric Power Corporation will launch the country’s biggest initial public offering since the economic downturn started, as the state-run company seeks to raise up to Rs60bn ($1.25bn).

The government, which controls the company, will divest a 5 per cent stake in NHPC, the country’s biggest hydro power producer, and hopes to use Rs20bn from the total proceeds to help it fund its growing fiscal deficit. The remaining Rs40bn will be reinvested in the company.

NHPC plans to offer 1.67bn shares to investors, out of which 1.11bn would be fresh equity.

The IPO comes as several companies try to exploit a surge in equity markets to raise capital. The Bombay Stock Exchange’s benchmark Sensex index has risen 32 per cent this year and has almost doubled since its low in March.

“We have decided a price band of Rs30-Rs36 for the IPO,” said S.K. Garg, NHPC chairman and managing director. The funds raised would be used for the expansion of existing plans.

The response will be keenly watched by investors as it could determine the government’s future divestment plans.

“The IPO is likely to be oversubscribed as power companies are going through a good period and they want to cash in on the boom,” said Girish Solanki, a power analyst in Mumbai.

Enam Securities Private, Kotak Mahindra Capital Company and State Bank of India Capital Markets will advise NHPC on the public offering, which will open on August 7 and close on August 11.

News of the government’s decision to sell part of NHPC came as Adani Power, one of India’s biggest emerging private electricity generators, said its IPO received bids for about four times the shares on offer on the first day of subscriptions.

The company expects to raise up to $625m through the share sale.

This month the government announced its divestment roadmap as it said it wanted to dilute its holdings in NHPC and in Oil India, the country’s second-biggest state-owned energy explorer that is expected to go public in September. The government plans to dilute its stake from 98.1 per cent to 78.5 per cent.