* Shares open 2.8 percent higher and rise as much as 10 pct
* Analysts say pricing for NHPC was a bit stiff
* NHPC sees 46 billion rupees in capex in FY10-chairman * Reaction may prompt IPO hopefuls to temper expectations (Adds details, company and analysts comments, byline)
By Ami Shah
MUMBAI, Sept 1 (Reuters) - Shares in India’s state-run NHPC Ltd (NHPC.BO) rose by 5 percent in their trading debut, lagging market expectations after the power company’s $1.25 billion IPO was heavily oversubscribed.
The muted debut is the second in a row from a major Indian company and may dampen enthusiasm for future listings.
Last month, shares in private-sector utility Adani Power (ADAN.BO) gained less than 1 percent on their first trading day after the firm raised $630 million. [ID:nBOM185970]
NHPC, a hydropower company, saw its offering subscribed more than 20 times in the first new listing by a state company in 18 months. India’s deficit-wracked government is planning further stake sales in state firms in order to help raise money.
“The listing is fairly below market expectations which was around 40-42 rupees,” said Ambareesh Baliga, vice-president at Mumbai-based Karvy Stock Broking.
“Promoters of forthcoming IPOs would have to ensure that pricing is not as aggressive as it was in this case. It is a clear signal to them that they should leave something on the table for investors.” At 0532 GMT, shares in NHPC were up 5.3 percent at 37.85 rupees, compared with the IPO price of 36, which was the top end of the indicated band.
The stock touched a high of 39.75 rupees after having made a debut at 37 rupees. The benchmark Mumbai index .BSESN was up 1.4 percent.
“Pricing was a bit stiff and pressure is coming from people who borrowed money to invest in the IPO,” said V.K. Sharma, head of research at Anagram Stock Broking.
NHPC Chairman S.K. Garg told reporters the listing was in line with the company’s expectations and the firm was confident about its growth prospects.
The company expects net profit to rise to more than 11 billion rupees ($226 million) in the fiscal year to March 2010 from 10.75 billion rupees last year as it focuses on new projects, he said.
NHPC’s capital expenditure in this fiscal year is likely to be 46 billion rupees, Garg said, adding the company had already spent about 20 billion rupees this year on new hydropower projects.
It has has developed 13 hydroelectric power plants with total installed capacity of 5,175 megawatts. It is building 11 projects with a total installed capacity of 4,622 megawatts.
Deven Choksey, chief executive of brokerage KR Choksey, said capital intensive companies such as NHPC tend to give good returns to long-term investors, and was a favourite with insurance firms and pension funds.
“NHPC is reaching a capacity of 9,000 MW of capacity in 2014, So I think it will become attractive when it comes closer to its full capacity,” he said.
Analysts said a lukewarm response for the first IPO by a state-run firm since Rural Electrification Corp RURL.BO tapped the market in February 2008 might prompt the government to re-work its stake sale plans in more firms.
At least a dozen state-run firms are considering either IPOs or follow-on offerings as they gear up for expansion in Asia’s third-largest economy and the government looks to trim its deficit.
State-run explorer Oil India Ltd plans to raise as much as 27.8 billion rupees through an IPO, making it the second state-run firm to offer new shares to the public this year. The IPO will open on Sept. 7 and close on Sept. 10. [ID:nBOM383174]
Private shipbuilder Pipavav Shipyard Ltd is likely to raise about 5 billion rupees through an IPO, a person close to the deal said on Monday, after it had deferred plans to raise funds last year due to poor market conditions. [ID:nBOM491462]
Indian firms have raised nearly $10 billion in share sales so far this year, surpassing 2008 volumes, helped by a 62 percent rally in the main BSE index this year. However, the index inched down 0.02 percent in August after it rose 8.1 percent in July.
Enam Securities, Kotak Mahindra Capital Co and SBI Capital Markets managed the NHPC deal. ($1=48.7 rupees) (Additional reporting by Devidutta Tripathy in NEW DELHI and Ketan Bondre in MUMBAI; Writing by Sumeet Chatterjee; Editing by John Mair)