The government offer for sale (OFS) of 9.5 percent in power sector major NTPC was subscribed 1.7 times on Thursday, with the issue generating a demand worth about Rs 19,400 crore.
Overall, the auction did better than most market watchers thought, says CNBC-TV18’s Udayan Mukherjee. He feels the valuation card worked out for the government. "We were constantly saying that at Rs 145 a piece there is not too much downside in terms of valuations and it is good to see that a lot of people blue-chip institutions also came in and bought that valuation story that at these kind of multiples. There is not too much to be lost and the hope that the company will get its act together over the 2-3 years," he says.
Moreover, Life Insurance Corporation of India (LIC) had to put in maybe Rs 3,000-Rs 4,000 crore, but by no means did it bail out the issue, says Udayan adding, good to see that some of the good institutions bought NTPC.
NTPC's weightage will also go up in the Morgan Stanley Capital International (MSCI). Mukherjee feels the real test comes now. "Most people bought at the lows of the issue, which is Rs 145 base price. Does the stock now go up and stabilise somewhere in the Rs 155-160 zone, which will make people who have bought the issue feel good, which did not happen with the NMDC (issue)? So, over the next few days if the newsflow is supportive on the power sector hopefully the stock helped by the MSCI weightage can inch up and stabilise well above Rs 10-15 higher than the Rs 145 base. The government should look at what it wants to bring to the market next because it has given in quite a bit of paper to global guys,” he says.
The next on the offer are not very strong companies: National Aluminium Company (NALCO), Steel Authority of India (SAIL). Barring valuations there is not a whole lot to recommend these stocks.
"You can go on feeding the market some of this paper, which is not great quality, but low value. But at some point there might be fatigue, which creeps in. So, I am a little cautious about the next few names that one is hearing for the month of March," Mukherjee says.