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NHPC IPO Gets Electrifying Response

The IPO was gone in 60 minutes as investors lapped up the offer

Government’s positive intent on divestment may well get concretized after the initial public offering (IPO) of National Hydroelectric Power Corporation (NHPC), India’s biggest hydro-electric power generator, got a huge response from investors.

The NHPC IPO, worth $1.25 billion, which opened today for subscription, was fully subscribed in no time, a rather strong response for the state run enterprise, according to Reuters.

The IPO was fully subscribed within an hour of opening.

This was the first stake sale by the government in a public sector undertaking (PSU) after more than 18 months.
Experts believe that the response could actually lead to the government quickening the process to ready other PSU offerings, which are being led by the Oil India Limited IPO.

Around Rs 4,000 crore of the NHPC IPO amount, which comes to around 6,220 crore in the Indian currency, would be used to finance the under construction projects of the company while Rs 2,000 crore will be given to the government, according to reports.

Slated to close on August 12, the NHPC IPO is for a total of 167.73 crore shares. The price band is between Rs 30-36.

That there is a huge demand for equity in the world of investors, for power utilities, is clear from the fact that just, a few days back, private-sector utility Adani Power's $ 630 million IPO, was oversubscribed more than 21 times. The stage looks to be well set for the Indiabulls IPO and Jindal Steel & Power.

The electrifying interest in power companies is due to the huge pent-up demand, or rampant shortages, that have crippled Indian businesses and homes. With the Government of India laying stress on quickly building up the country’s infrastructure, one of the most crucial aspects of fulfilling that purpose would be through creating surplus power.

NHPC has around 11 projects of 4,622 Megawatt capacity that are currently under various stages of construction while the company is awaiting government's nod for five more projects and joint venture projects as well. Enam Securities, Kotak Mahindra Capital and SBI Capital Markets are the managers of the NHPC IPO.

However, it must be remembered that almost every power project that is ongoing is facing a huge delay in implementation, for one reason or another (from lack of land acquisition, fuel shortages, government-related slowdowns etc) which will hurt investors’ interest.