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The UPA Government has cleared partial sale of its stakes in state-run power major NTPC Ltd and an unlisted hydro-electric firm Satluj Jal Vidyut Nigam Ltd (SJVNL) through the book-building route in the domestic market. The Cabinet Committee on Economic Affairs (CCEA) gave its nod to sell 5 per cent of the Centre’s stake in NTPC and 10 per cent in SJVNL, the Commerce and Industry Minister, Mr Anand Sharma, told reporters after the meeting.

The Budget had set a target of mopping up Rs 1,120 crore in 2009-10 through disinvesment -- excluding the cases that were lined up in 2008 but could not be carried through due to Left's opposition. Banks and insurance firms were, however, kept out of the selloff ambit and it was also stated that the government would not allow its holding in any other entity to slide below 51%.

In the case of NTPC, which made an initial public offer in 2004, the Government will divest stake through a follow-on public offer, which is likely by December, a senior Power Ministry official said.

Post the stake dilution, the Government’s holding in NTPC would fall to 84.5 per cent from the current 89.5 per cent. “To make it inclusive and participatory, part of the shares would be offered to the employees of the state-run firms,” Mr Sharma said.

At the current price of Rs 216 a share, the proposed 5 per cent NTPC stake sale could mop up about Rs 8,800 crore.

“On disinvestment of the proposed equity, it is expected that the market capitalisation of NTPC would be higher and it would help the company raise resources in the international market on competitive terms,” he said.

The CCEA also approved offloading 10 per cent of the Centre’s 75 per cent stake in SJVNL — a joint venture between the Union Government and the Government of Himachal Pradesh (which holds the remaining 25 per cent stake). The paid-up equity of the company is Rs 4,108.81 crore.

The proceeds would go into the National Investment Fund, which was set up in 2005.

According to market analysts, a follow-on public offer of NTPC, the second most valued public sector company with a market capitalisation of over Rs 1.77 lakh crore, would serve as an overall sentiment booster.

The Economic Survey, a report card on the economy that was released before the Budget, had suggested an annual target of Rs 25,000 crore from disinvestment proceeds. It had suggested the government sale at least 10% in all unlisted profitable state-run entities and auction units that cannot be revived. The Survey's gung-ho attitude was in line with the overall mood on reforms in the present ruling establishment.

Source - Hindu