Power majors NTPC, SJVN upbeat about stake sale

20 Oct 2009

Nudging forward its cautious disinvestment programme, the union government will sell a fraction of its holding in two power utilities, National Thermal Power Corp and hydropower generator Satluj Jal Vidyut Nigam Ltd (SJVN), a joint venture between the union and Himachal Pradesh governments.

The cabinet committee on economic affairs (CCEA) decided that the government would reduce its stake in NTPC by 5 per cent and also sell 10 per cent of SJVN's equity through a public offering.

The government has a declared intention to bring down its stake in all listed entities to 75 per cent, which is also market regulator Securities and Exchange Board of India's norm for listed companies. The government's current holding in NTPC is 89.5 per cent, which will come down to 84.5 per cent after the equity sale.

In a statement, the government said that following the divestment of government's stake, the share price of NTPC is likely to go up, which would help the company raise resources in the international market on competitive terms. In fact, both the market and the management of the two power generators reacted positively to the news.

R S Sharma, chairman and managing director of NTPC, said he expects the stake sale to take place in February. At the current market price, 5 per cent of NTPC equity would mop up about Rs8,800 crore. The stake sales are clearly timed to take advantage of a buoyant stock market.

The proceeds will go to the public exchequer and be parked in a fund to finance social sector schemes. "To make the sale inclusive and participatory, part of the shares would be offered to the employees of the state-run firms," commerce minister Anand Sharma told reporters in New Delhi.