NHPC share sale: issue oversubscribed on Day 1

While retail investor interest in initial public offers has been on the rise as can be seen from recent primary issues, not much is expected from NHPC, according to some brokerages

The Centre’s disinvestment plans for 2016-17 got off to a good start with the Rs 2,700-crore offer for sale in hydro power company NHPC being subscribed 1.56 times, driven by strong demand from institutional investors.

Bombay Stock Exchange. Investors happily bought NHPC shares on the first day of disinvestment on Wednesday(HT file photo)

While the issue saw healthy response from institutions on Wednesday, retail investors, who can subscribe from Thursday, may not show similar strong response, given NHPC’s past underperformance and poor track record, according to market analysts.

The floor price for NHPC’s offer for sale was set at Rs 21.75 a share, and the issue, comprising nearly 1.26-billion equity shares, got bids for 1.57 billion shares till the close of exchanges. About 20% of the offer is reserved for retail or small investors, who can bid for shares valuing up to Rs 2 lakh, and at a 5% discount to the cut-off price.

While retail investor interest in initial public offers has been on the rise as can be seen from recent primary issues, not much is expected from NHPC, according to some brokerages. “If you look at the track record of NHPC, the stock has been an underperformer…projects have been behind schedule. I don’t think there will be a lot of participation from retail investors,” said Sanjeev Zarbade, vice-president at Kotak Securities.

NHPC had come out with an IPO in 2009 at an offer price of Rs 36. On Wednesday, shares of NHPC ended 6.5% down at Rs 21.55, while Sensex ended up 0.2%. Retail interest will be strong for firms that have strong track record and good growth visibility, Zarbade added.

According to market analyst Sudeep Bandyopadhyay, while NHPC’s divestment has seen a good start, the government will have to look at selling stakes in bigger profitable PSUs if it wants to achieve its divestment target of Rs 56,500-crore for 2016-17 .

Read: CAG: Disinvest loss-making PSUs

“Share sale in companies like NHPC will not help government achieve its targets…SUUTI (a special undertaking that holds UTI’s stake in various listed companies) holds significant stakes in firms, such as Axis Bank, Larsen & Toubro and ITC. The government should look at paring those stakes too,” Bandyopadhyay added.

The government currently owns 85.96% stake in NHPC and the 11.36% share sale will bring down its stake to 74.6%.

Edelweiss Securities, HSBC Securities and Capital Markets India and IDFC Securities Ltd are lead managers of the issue.

Last fiscal, the Centre had set an ambitious target to raise Rs69,500 crore via divestment, but was later trimmed down to Rs 25,312 crore due to volatile equity markets.

Read: Niti Aayog to give plan for divestment, strategic sale of PSUs in loss