Power Grid scrip falls on discounted offering

08 Nov 2010

Shares in Power Grid Corporation of India were down 5 per cent in early trading today with the state-run electricity transmission utility fixing the price band for its up to $ 1.7 billion share sale at a 12-17 per cent discount to its Friday closing.
 
The company's share sale follows a highly successful $3.4-billion IPO of state-run Coal India. However, the offering is not expected to find similar favour with investors as the stock is already listed.

The Coal India share offer received bids exceeding 15 times the shares worth and chalked up a spectacular 40 per cent gain on debut on Thursday.

The government is targeting around $8.5 billion from share sale in 2010-11 as it looks to reduce its fiscal deficit with offloading its holding in some 60 state-run firms over the next few years. According to analysts, the government's efforts to shed stakes in already listed companies have met with mixed success.

They say sale of stake earlier in the year in listed entities NTPC and NMDC were fully subscribed only following state-run insurers and banks picking up shares that were ignored by retail investors, though a $760 million share sale by listed Rural Electrification Corp receive a more enthusiastic response.  

The Power Grid share sale is set to open tomorrow and end on Friday.

On offer in the share sale are over 84 crore equity shares of Rs 10 each constituting 20 per cent of the state-run transmission company's existing paid-up capital. At the upper end of the price band, the issue would fetch up to Rs7,600 crore.

Half the shares on sale are part of the government's existing stake in the firm, while the other half are newly issued shares by the company. As on 30 September 2010,  the government's holding stood at 86.37 per cent in the company.

Power Grid Corporation of India's net profit was up 41.6 per cent  to Rs 651.40 crore as sales rose 25 per cent to Rs 2126.63 crore in Q2 September 2010 over Q2 September 2009.