CCEA gives go ahead for 5% divestment in NTPC, 10% in IOC

The government, however, had missed previous year's target by more than a half. It had set a divestment target for 2014-15 at Rs 63,425 crore, but managed to raise only Rs 31,350 crore, which includes Rs 5,000 crore from sale of SDR (special drawing rights) to the Reserve Bank.

In an interview with CNBC-TV18, veteran broker Dipan Mehta spoke about the development.

Transcript of the interview.

Q: Looking at IOC and NTPC as the next off the block. What would you say, given the market fall over the last couple of sessions, in fact the last couple of weeks, would appetite or would the attitude towards some of these share sales change or would there still be significant appetite?

A: I don’t think there will be much appetite for these companies and as has been the case of several other PSU disinvestments, is that government persists and goes ahead with the disinvestment in such market conditions then it may have to be bailed out by the state owned insurance companies or other institutions.

I don’t think they are going to get much retail or FII or mutual fund participation. In any case both these companies have got patchy track record, they have not been great value creators, their performance has been at best pretty volatile in terms of earnings. So, I don’t think that there is going to be much appetite for these shares. May be the government even if it offers a discount it will just about scrape through. So, timing is everything and I think the timing right now is certainly not right.

Q: I was just going to come to that whether this is more of an issue of the nature of the business right now and how these companies are shaping out or is it just a function of the fact that there is a little bit of foreign institutional investor (FII) disenchantment from the Indian market? What is the bigger issue here?

A: The way the government is going about its disinvestment programme, it does not give much of a confidence. And there is a great deal of paper as far as government public sectors (PSU) are concerned and as such nothing has changed in the new national democratic alliance (NDA) government, we are hoping for better autonomy and better performance of these companies. But really nothing has happened. So, I do not think, it still is a bit of both timing as well as the quality of the companies.

Q: If I were to push you and ask you between the two NTPC and IOC, which has a better chance of going through and of course, for IOC the fact that crude prices, yes they have rebounded from their lows, but at least they are not as high as what they used to be. And there also is a fair degree of free pricing as far as fuel is concerned. So, would that make the going any easier?

A: Both are equally placed in terms of performance and it is not going to make much of a difference. It is just one over the other. Both are equally attractive depending on who is assessing those companies.