NTPC is entering the market with a follow on offering where the principal shareholder the government of India is selling by way of divestment 5% of the equity amounting to 41.227 cr shares. The issue opens on Wednesday the 3rd of February and closes on Friday the 5th of February.
| Offer for Sale | 41,22,73,220 shares representing 5% of paid up capital |
| Seller | President of India acting through the Ministry of Power |
| Floor Price | Rs 201 |
| Employee quota | 42,73,220 shares |
| Net Offer | 40,80,00,000 shares |
| QIB’s | 20,40,00,000 shares to be bid through French Auction |
| Non-Institutional Investors | 6,12,00,000 shares at floor price |
| Retail Investors | 14,28,00,000 shares at floor price |
| Discount to Employees | Rs 10 per share on floor price |
| Book Running Lead Manager | ICICI Securities Limited |
| Citigroup Global Markets India Private Limited | |
| J P Morgan India Private Limited | |
| Kotak Mahindra Capital Company Limited | |
| Syndicate Member | Kotak Securities Limited |
| Isssue Opening Date | Wednesday 3rd February |
| Isssue closing date | Friday 5th February |
| IPO Grade | As this is not an IPO no grading of offer is required |
A lot has been written about NTPC and as this is a follow on offer, there is no change in fundamentals as there is no dilution of equity is taking place.
Let us look at some key factors for NTPC.
The vision of NTPC is to be “A world class integrated power major, powering India’s growth, with increasing global presence”.
Growth achieved – First unit commissioned in 1982 of 200 MW in Singrauli. NTPC was set up in 1975. By 1990, NTPC had 10,000 MW in operation. In 2009-10, capacity under generation is 30,646 MW, larger than all private sector players put together. If one were to compare just private players and thermal capacity than against the 13,663 MW in operation as of September 2009, NTPC is 2.2 times the size.
Platts Global Energy Company ranks NTPC as the number 1 company in Asia and the number 2 company in the world. This ranking is based on a combination of four parameters namely: – Asset worth, revenues, profits and return on invested capital.
NTPC has projects which are located across India.
15 power projects based on coal with 24,395 MW.
7 power projects based on gas/liquid fuels with 3,955 MW.
Through JV’s it has 4 power projects generating 2,294 MW.
The future for NTPC is even brighter.
NTPC has 17,930 MW currently under construction in various parts of India.
| Projects | Type | State | Gross Capacity Megawatts | Approved Project Cost in million Rs | Technology | Power Offtake |
| Sipat – I | Coal | Chhatisgarh | 1980 | 83234 | Super-critical | Long term |
| Barh – I | Coal | Bihar | 1980 | 86930 | Super-critical | Long term |
| Barh – II | Coal | Bihar | 1320 | 73410 | Super – A | Long term |
| Korba – III | Coal | Chhatisgarh | 500 | 24485 | Sub- critical | Merchant |
| NCTPP -II Dadri | Coal | Uttar Pradesh | 980 | 51353 | Sub- critical | Long term |
| Farrakka – III | Coal | West Bengal | 500 | 25704 | Sub- critical | Merchant |
| Simhadri – II | Coal | Andhra Pradesh | 1000 | 50385 | Sub- critical | Long term |
| Bongaigaon | Coal | Assam | 750 | 43754 | Sub- critical | Long term |
| Mauda -I | Coal | Maharashtra | 1000 | 54593 | Sub- critical | Long term |
| Rihand – III | Coal | Uttar Pradesh | 1000 | 62308 | Sub- critical | Long term |
| Vindhyachal – IV | Coal | Madhya Pradesh | 1000 | 59150 | Sub- critical | Long term |
| Kol Dam | Hydro | Himachal Pradesh | 800 | 45272 | Sub- critical | Long term |
| Loharinag Pala | Hydro | Uttrakhand | 600 | 28951 | Sub- critical | Merchant |
| Tapovan Vishnugad | Hydro | Uttrakhand | 520 | 29785 | Sub- critical | Merchant |
| Vallur -I Phase II | Coal | Tamil Nadu JV project | 1000 | Sub- critical | Long term | |
| Vallur -I Phase II | Coal | Tamil Nadu JV project | 500 | Sub- critical | Long term | |
| Indira Gandhi STPP | Coal | Haryana | 1500 | Sub- critical | Long term | |
| Nabinagar | Coal | Bihar JV with railways | 1000 | Sub- critical | Long term | |
| Total | 17930 | 719314 |
| If one is to look at the future growth it is as follows | |
| Currently under operation | 30,646 MW |
| Projects under construction | 17,930 MW |
| Bids invited from vendors | 9,462 MW |
| Feasibility report approved | 4,245 MW |
| Feasibility report under preparation | 20,000 MW |
This would take NTPC to its stated goal of generating 75,000 MW by 2017.
On the fuel side, the company has signed 20 year coal supply agreements with subsidiaries of Coal India. It also imports coal and during the financial year 2008-2009 used 4.2% of imported coal. On the gas front the company has long term supply agreements with multiple vendors.
Product mix of coal based plants which are 82% currently with the balance being gas and naphtha based will change significantly. By 2017 coal based would reduce to 70%, gas based would form 14%, hydro 12%, nuclear 3% while renewable energy would be about 1%.
On the sales side, NTPC has long term PPA’s (power purchase agreement) ranging from 15-35 years where fuel cost is a pass through and payment security is in place. NTPC has realised 100% of its payments and there has not been a single default over the last six years.
Valuations
Based on the company’s performance for the year ended March 2009 the EPS was Rs 9.95 while based on the nine months ended December 2009 on an annualised basis the same has increased to 10.85. If we are to take the floor price as the indicator the PE at which the shares are being offered is 18.53 which is an attractive price by all standards or calculations.
The stock price of NTPC made a high of Rs 241.70 on 31st December 2009 and has been under constant pressure thereafter. There are various theories being propounded about the reason for the fall but it should suffice to say at Rs 2010 it is very attractive.
I believe investors should subscribe to the issue and if for any reason the market price in the next three days comes to that level, they may as well buy from the market.
Conclusion
It’s a great opportunity to enter into a growth stock. Subscribe.
Sebi Disclaimer: – I intend to subscribe to the issue.
You may also refer to an earlier article for details on NTPC.
