The power ministry is working on a strategy to offload stakes in public sector companies under its purview through initial public offers.
While the National Thermal Power Corporation issue is scheduled to open on September 23, the power ministry is keen to ensure that the Power Finance Corporation's float hits the market this financial year. The ministry has asked PFC to rework its IPO proposal.
Subsequently, PowerGrid Corporation and National Hydroelectric Power Corporation are expected come out with IPOs. Power Trading Corporation is already a listed company.
Said a senior power ministry official: "We are planning to first take up companies that do not require budgetary support any longer. We will then take up PowerGrid and NHPC, which are getting budgetary support at present."
While the timing of the PowerGrid IPO has not been worked out, officials said it might hit the market over the next 15-18 months. In NHPC's case, the government is trying to ensure that the operational capacity is increased and the company's internal resource mobilisation improved.
In the case of PFC, the power ministry has turned down its proposal to return capital to the government at face value.
"It does not make sense for the government to accept capital at the face value or the book value when the company proposes to issue shares at a premium. The government will off-load a part of its stake in the company," an official said.
PFC has an equity base of Rs 1,030 crore (Rs 10.3 billion) and earnings per share of around Rs 8. The book value of PFC's equity is over Rs 2,100 per share, against the par value of Rs 1,000 per share.
The state-owned company had proposed to return around Rs 500 crore (Rs 5 billion) of equity to the government to improve its P/E ratio.
Power ministry officials said the IPOs could also be part of the government's divestment strategy where it could offload some of its stake.
In NTPC's case, the government will offload a 5.2 per cent stake, for which clearance is awaited from the Securities and Exchange Board of India. NTPC is also raising equity, equivalent to 5.2 per cent of the paid-up capital, through the IPO.