NTPC a long-term investment oppurtunity: Prime Database

In an interview to CNBC-TV18, Prithivi Haldea, chairman and managing direct, Prime Database gives his views on NTPC's divestment held today. The government sold 9.5 percent of the company's stock, at a minimum price of Rs 145 per share for bids. 

Haldea says that the Government would be extremely happy at this response received by the stock. "It has been oversubscribed and significantly oversubscribed. Given the size of the issue, the response is overwhelming and the government should be very happy that this is not gone the Oil and Natural Gas Corporation (ONGC) way," he says.

Below is the edited transcript of Haldea's interview to CNBC-TV18.

Q: How are you rating the National Thermal Power Corporation (NTPC) divestment?

A: The government would be extremely happy at this response because it has been oversubscribed and significantly oversubscribed. Given the size of the issue, the response is overwhelming and the government should be very happy that this is not gone the Oil and Natural Gas Corporation (ONGC) or any other different way and the government has been able to get the money that it wanted.

Q: It got Rs 500 crore shy of what it wanted, it wanted Rs 12000 crore. Do you think if the floor price perhaps had been a little lower it could have mopped up more?

A: No, I don’t think so. People who have invested in this issue are not looking for a rupee or a two rupee gain. This is not much of a trading interest opportunity. Infact it is more of a long-term investment opportunity. The arbitrage opportunity was very limited and therefore, most of the people who would have come into this stock are investors who wanted to increase their holdings. We already know that 250 plus institutions are holding NTPC stock, domestic and foreign institutional investor (FII) and some new FIIs have come into this stock. It would be interesting to see that quality of investors, but those are getting into nitty grities. I don’t think this is a bailout issue. Even if LIC or others have put in large bids, non-state institutions have played an important role.

However, we could have used this opportunity to increase the retail investor’s base. We could we have offered this issue at a greater discount and got a few million new investors as well as small existing investors into this stock and into the market.

Q: The government so far has raised about Rs 21000 crore from disinvestment. It's target is about Rs 30000 crore. So, you think it has the confidence now, to perhaps have a few more issues and try and meet that target within this fiscal?

A: If you look at NTPC for example, its 30 day high was almost Rs 165. Now, they have sold the stock at Rs 145 which is not reason why the stock lost Rs 20 in the last few days. However, is Rs 145 the right valuation, is the question. Going forward, in case there are opportunities where good stocks are available at a discount to the market price, surely there will be a response in the market place because it is either purely trading opportunity or people will be looking at long term investment into some high quality stocks.

However, discount will obviously play an important role in attracting investment. If these are very good stocks, why not go for closed auction? Why not allow institutions to bid aggressively in terms of pricing to get hold of larger quantity? In the OFS, almost all bids typically converge at the floor price and the government is not able to get money higher than the floor price. The Maruti model is still a model which should be tested and tried. There would be institution who would like very large quantities at a price higher than the market price and therefore one can even actually realise much more money than what is wanted.