Sale of Power Grid gets bids for 6.7 times stock on offer

MUMBAI Fri Dec 6, 2013 7:13pm IST

A man walks under high-tension power lines on the outskirts of Mumbai February 13, 2013. REUTERS/Vivek Prakash/Files

A man walks under high-tension power lines on the outskirts of Mumbai February 13, 2013.

Credit: Reuters/Vivek Prakash/Files

Related Topics

Stocks

   
Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

MUMBAI (Reuters) - A 700 billion rupee sale of shares in state-run Power Grid Corp Ltd (PGRD.NS) received bids for 6.7 times the stock on offer by close on Friday, in an issue that helps the government inch toward its asset-divestment target.

The level of demand indicates healthy investor appetite despite Asia's third-largest economy growing at its slowest pace in a decade and political uncertainty in view of a general election to be called by May.

The government will raise $270 million from selling 4 percent of the company. Power Grid, India's central power transmission utility, is issuing another 601.9 million new shares to raise funds for capital expenditure.

India aims to control its budget deficit for the fiscal year ending March, in part by raising $6.4 billion through the sale of stakes in state companies. But it has raised only $233 million since April, because disagreements among ministries and a depreciation in the rupee have complicated the timing of issues.

If the deficit is wider than the targeted 4.8 percent of gross domestic product, credit-rating agencies could downgrade the government's debt to "junk" status, significantly increasing its cost of raising funds.

The government next hopes to sell 5 percent of Coal India Ltd (COAL.NS) and 10 percent of Indian Oil Corp Ltd (IOC.NS), which could earn it up to $2.3 billion, but both offerings are likely to be delayed.

"Government divestment is only happening in bits and pieces. The target is not impossible, but the Coal India (offer) is crucial toward that effort," said SMC Global Securities chief strategist Jagannadham Thunuguntla.

Neither offer is likely to begin as planned by mid December because of labour opposition at the coal miner and poor investor sentiment in the subsidy-ridden oil sector, government officials have said.

TOP END

Most bids for Power Grid shares were at the top end of an indicative price range between 85 and 90 rupees, data from the stock exchanges showed, making the final price likely to be nearer 90 rupees.

"The government got the pricing bang-on. There will always be takers for good companies which are reasonably priced," said Thunuguntla.

Institutional investors, for whom the offer closed on Thursday, bid for 9 times the number of shares available to them, with bids from foreign investors reaching $2.7 billion, exchange data showed.

Retail investors and employees, for whom the offer closed on Friday, bid for 2 times and 1.3 times the shares available to them respectively. These bidders will receive a 4.5 rupee-per-share discount on the allotment price.

Most analysts recommended buying the shares because Power Grid has a track record of stable returns and a strong investment plans.

The government's ownership of Power Grid will fall to 57.9 percent from 69.4 percent after selling a portion of its stake and because the company's new share issue will dilute its holding.

Shares of Power Grid closed 2.8 percent higher at 98.95 rupees, compared with a 0.2 percent rise in the benchmark index .BSESN.

The Power Grid share sale is India's biggest since February, when state-run power utility NTPC Ltd (NTPC.NS) raised $2.2 billion. Indian companies have raised $8.3 billion by selling shares so far in 2013, against $14.9 billion in all of 2012, Thomson Reuters data showed.

(Additional reporting by Sumeet Chatterjee in Mumbai and Manoj Kumar in New Delhi; Editing by Christopher Cushing and David Holmes)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Oil Imports

Oil Imports

India to make May-July oil payments to Iran - sources.  Full Article 

DLF Shares

DLF Shares

DLF slides 3 percent, underperforms rivals.  Full Article 

Global Economy

Global Economy

Chinese factories stalling as euro zone business picks up  Full Article 

Rupee Falls

Rupee Falls

Rupee falls for third day; foreign fund inflows key.  Full Article 

Record High

Record High

BSE Sensex hits record high for third straight day.  Full Article 

M&M Upgraded

M&M Upgraded

Credit Suisse upgrades Mahindra & Mahindra to 'outperform'  Full Article 

Breakingviews

Breakingviews

Manchester United’s crisis has silver lining  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage