NTPC issue scrapes through with support from SBI, LIC

Foreign institutional investors and India’s retail investors gave a thumbs down to the prestigious Rs 8,300-crore follow-on public offer of NTPC, the navratna, which owns country’s 20% power generation capacity. The issue managed to sail through and fully subscribed primarily due to the support from the state-owned banks and insurance monolith LIC.

Following the poor response, the senior officials from the company and the department of disinvestment went into huddle to find out the reasons, said a senior executive in the government. “The actual reasons of this poor show can be attributed to method of divestment — French auction, or the sudden change in the market sentiment or the poor performance by the investment bankers is yet to be known, but it will impact all the future issue by the state-owned companies,” said the official.

Despite huge support from state-owned financial firms, the issue was subscribed only 1.2 times. It has received a little over 100,000 applications from the retail investors. Some of the recent public issues of smaller companies have received much better retail response, said a senior executive from the company. DB Corp’s recent issue of Rs 1,500 crore had received 73,000 applications, according to Prime Data base. Similarly, JSW Energy issue received 87,000 retail applications.

The official said that the both forthcoming issues Rural Electrification Corporation and NMDC, which are slated to open on February 19 and March 10 respectively, will have to come under the French auction route. REC has already taken approval from Sebi to complete the FPO under French auction route, said the official and added NMDC has filed the draft red herring prospectus with Sebi under the same route. Now, it is difficult to change the method to book building route, he added.

Source : http://economictimes.indiatimes.com/NTPC-issue-scrapes-through-with-support-from-SBI-LIC/articleshow/5540681.cms