NTPC FPO pricing could jolt divestment programme: Tulsian

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NTPC FPO pricing could jolt divestment programme: Tulsian

The NTPC follow-on public offering (FPO) of 412,273,220 equity shares will close for subscription today. Investment Advisor, SP Tulsian said pricing of NTPC issue would really be a big jolt to the disinvestment programme of the government.

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The NTPC follow-on public offering (FPO) of 412,273,220 equity shares will close for subscription today. Investment Advisor, SP Tulsian said pricing of NTPC issue would really be a big jolt to the disinvestment programme of the government.

Here is a verbatim transcript of the exclusive interview with SP Tulsian on CNBC-TV18. Also watch the accompanying video.

Q1: Give us one word on how things have progressed on National Thermal Power Corporation (NTPC), are you surprised, even on the institutional side there don't seem to be too many takers?

I think looking to the price band or the floor price of NTPC follow-on public offer having announced by the government, nobody will take a risk of subscribing the share at Rs 202. Because floor price has been fixed at Rs 201 and all the institutional investors have to bid above that floor price, it has to be Rs 202.

If you see the price movement on December 31, the share had a high of Rs 242 and we have seen price of almost Rs 35-40 getting erased in a month. So this kind of volatility - but government has been found to be very greedy. Again they have come out with a stiff floor price, no discount has been given. Generally in fact the aim or the motto of the government should have been to attract the retail investors. And I think if they would have kept a lower floor price of below Rs 200 that would have acted sentimentally positive for the stock and should have given at least some discount over the floor price which they have given in case of employees of Rs 10.

So I don't think that there is any reason for the institutional investors or even for retail to go ahead with this. And this will really be a big jolt to the disinvestment programme of the government but I think they need to be blamed for themselves.

Q2: How do you think it will end, today is the last day, do you think some appetite will come up in these market conditions or will large sections be undersubscribed, it is only government institutions like State Bank of India (SBI) and Life Insurance Corporation (LIC) which will finally bail it out?

A: I think it will just be the government financial institutions as you have rightly said, SBI and LIC. In fact it is putting money from one pocket to the other pocket and I don't think that you can call this as a disinvestment programme. Because we have umpteen number of times discussed that if the government is unable to attract the retail investors, in none of the companies they have more than 10-11 lakh investors. If they are unable to do that, I don't think that they are succeeding in their divestment programme.

Honestly if you see the structuring of all these issues, the retail portion is getting spilled over in the category of the institutional investors. In fact there should be a rule that if retails have not subscribed to the issue, the issue should be called off. Because majority of the cases we have seen that 500 to 1,000 investors which falls in the HNIs and institutional investors category are bailing out many of the issues; why to talk of NTPC. Even in case of other smaller companies or maybe even the bigger companies.

So unless until you have some stiff rules like unless until you have 30-35% subscription from the retail category, the issue will not sail through and at least government should adhere to these norms which are not the written laws. But at least they should adhere to see that they are able to garner the support of the retail investor at least to the extent of the reserve category or reserve portion for them.