NHPC IPO likely by late October or early November

National Hydroelectric Power Corporation8217;s initial public offer of 167.74 crore shares face value Rs 10 is likely...

National Hydroelectric Power Corporation8217;s NHPC initial public offer IPO of 167.74 crore shares face value Rs 10 is likely to hit the market by the end of October or early November. The issue comprises a fresh issue of 111.83 crore equity shares by NHPC and disinvestment of 55.91 crore equity shares by the government. While 163.54 crore equity shares will be offered to the public, 4.19 crore equity shares will be reserved for NHPC8217;s employees. The issue will constitute 13.64 per cent of the post-issue capital of NHPC.

According to NHPC chairman S K Garg, 8220;Starting from the 11th Five-Year Plan, the government has stopped providing budgetary support to the company. It has given the company the mandate to disinvest up to 24 per cent of the paid-up capital of the company, of which this initial public offer constitutes the first tranche.8221;

NHPC has so far constructed 13 hydroelectric power stations and has an installed capacity of 5,175 MW. Presently, it is engaged in the construction of 11 projects, which are expected to increase its capacity by 4,622 MW. Further eight projects, with an anticipated capacity of 5,751 MW, are awaiting sanction from the CCEA. Survey and investigation work are being carried out to prepare project proposal reports for nine additional projects, totalling 7,255 MW.

Two-thirds of the proceeds from the IPO will go to the government and one third to the company. Rating agency ICRA will rate this IPO.

Chairman Garg expressed confidence that the IPO would sail through. 8220;This IPO will be a challenge as the market is volatile. But the shares of a public sector company are being disinvested after a long gap. Given our financial strength, the state of the power sector where demand far exceeds supply, and reasonable pricing of the issue, the response should be good.8221;

NHPC has strong financials. In FY 2008, it generated total income of Rs 3,675.61 crore, while its net profit was Rs 1,232.31 crore. Between 2004 and 2008, the company8217;s net profit has grown at a compounded annual growth rate of 17.99 per cent. Chairman Garg is confident of maintaining this growth rate in profit even in future. 8220;We expect to maintain a high growth rate in profits even in future, because, according to the tariff policy, we get an assured return on equity of 14 per cent.8221; Two initiatives currently underway should boost NHPC8217;s efficiency further. For monitoring of its projects, the company is introducing an Enterprise Resource Planning ERP system. It is also undertaking an organisational restructuring exercise for which Ernst and Young has been appointed consultant.