NHPC Shares Experience 6% Decline as Government Initiates Two-Day Offer for Sale (OFS)

Shares of the state-run NHPC witnessed a notable 6% decline to reach the day's low at Rs 68.70 on the NSE as the government's Offer for Sale (OFS) commenced on Thursday. The government aims to divest 2.5% of its stake in NHPC, amounting to 251,125,870 shares, with a floor price set at Rs 66 per share, reflecting a nearly 10% discount from the prevailing market price.

Market Reaction: The market response was swift, with NHPC shares closing nearly 1% higher at Rs 73 on the day the OFS was announced post-market hours. However, the subsequent drop in share value underscores investor concerns about the discounted offering.

OFS Details: The government plans to sell an additional 1% of NHPC's total paid-up capital, amounting to 100,450,348 shares, in case of oversubscription. The OFS is open for subscription for institutional investors on the first day and for retail investors on the following day. Notably, a minimum of 25% of the offer has been reserved for mutual funds and insurance companies, while 10% is allocated for retail investors.

Government's Stake and Disinvestment Strategy: As of December-end, the government holds a substantial 71% stake in NHPC. In the current fiscal year, the government has raised over Rs 10,000 crore through disinvestment, utilizing the OFS route for companies such as Coal India, Hindustan Aeronautics, Housing and Urban Development Corporation, IRCON International, Rail Vikas Nigam, and SJVN. The last OFS conducted by the government was in SJVN in September, generating Rs 1,349 crore.

Market Performance and Outlook: NHPC shares have demonstrated a robust performance, surging over 60% in the past year and outperforming the Nifty by a significant margin. The bullish trend is attributed to strong demand, capacity additions, and the government's heightened focus on renewable energy, which has positively impacted power stocks.

The ongoing OFS for NHPC is closely watched by investors as it unfolds over the two-day subscription period. The discounted floor price, set below the market rate, raises questions about the investor sentiment and appetite for government disinvestments. The outcome of this offering will likely contribute to shaping market perceptions of similar transactions in the future.