Government to Sell 3.5% Stake in NHPC via OFS

The Indian government has announced its plan to sell a 3.5% stake in the state-run renewable energy major NHPC Ltd through an offer-for-sale (OFS). The sale will be divided into a base size of 2.5% and a green shoe option of 1%. Non-retail investors can participate in the OFS on January 18, while retail investors can bid on January 19.

The Department of Investment and Public Asset Management (DIPAM), under the Ministry of Finance, made the announcement on ‘X,’ highlighting that the government aims to divest 3.5% equity, including the green shoe option. This move is part of the government’s ongoing divestment drive.

In order to ensure wider participation, around 10% of the offer shares will be reserved for allocation. Retail investors, defined as individuals placing bids for shares valued up to INR 2 lakhs across stock exchanges, can also take part.

If oversubscribed, the government plans to sell an additional 1% of the total paid-up capital, which represents 100,450,348 shares. The allocation will be based on price priority and multiple clearing prices, following the SEBI OFS circular, with an exception for retail investors who have the option to bid at or above the cut-off price.

The OFS involves the sale of over 25 crore equity shares in NHPC, with an additional 10 crore shares available through the green shoe option. The floor price has been set at INR 66 per share, representing a discount of 9.66% compared to Wednesday’s closing price. This offering is expected to generate approximately INR 2,300 crore for the government.

NHPC’s shares closed slightly higher on Wednesday at INR 73.06 per share, reflecting positive investor sentiment ahead of the OFS. The proposed stake sale aims to support the government’s efforts to raise funds and achieve its divestment target.

The Indian government has faced challenges in meeting its divestment target for the current financial year, with only around INR 100.5 billion raised so far, far below the target of INR 510 billion. However, this OFS, along with other divestment initiatives, will contribute towards bridging the gap and boosting government revenues.