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Wednesday, January 20, 2010

NMDC, NTPC to Help India Raise Record $5.5 Bn

India will sell as much as 250 billion rupees ($5.5 billion) of shares in state-run companies this fiscal year, more than half the total raised since privatization efforts began in 1991, the official in charge of the sales said.NMDC Ltd., the nation’s largest iron-ore producer, and NTPC Ltd., the biggest electricity provider, are among companies taking advantage of a 94 percent rally in the benchmark stock index in the past year. The government is planning to reduce its stakes in as many as 68 companies to improve returns, said Sunil Mitra, secretary of the Department of Disinvestment.

“There’s enough liquidity in the market and we feel the release of good quality shares of public-sector companies will help stabilize the markets,” Mitra said in an interview in New Delhi yesterday. “The government’s decision to sell small stakes will help unlock shareholder value.”The sales are needed to help plug a budget deficit that may climb to the equivalent of 6.8 percent of gross domestic product in the year ending March 31, a 16-year high. “There is a pressure on the deficit side,” Mitra, 58, said.

Net purchases of Indian stocks by overseas funds totaled $17.7 billion last year, matching the record set in 2007, as Asia’s third-biggest economy weathered the global recession. JPMorgan Chase & Co. and India Capital Management Ltd. predict the benchmark Sensitive Index will rise at least 15 percent in 2010, fueled by consumer spending and prospects gross domestic product will increase 8 percent.Record SaleNMDC may sell shares between March 9 and March 12, raising about 174 billion rupees based on yesterday’s closing price, in what would be India’s biggest government offering. The Hyderabad-based company soared 30.6 percent in the past three days on speculation the sale will attract excess demand.

NMDC shares rose as much as 8.5 percent to 571.8 rupees, the highest since it began trading in 1997. The shares rose 5.5 percent to 555.9 rupees at 3:30 p.m. close in Mumbai today.Mitra said he is drafting plans for more share sales in the year beginning April 1, including probable offerings by Steel Authority of India Ltd., the nation’s second-biggest steelmaker, Coal India Ltd. and telephone operator Bharat Sanchar Nigam Ltd.

Unavailable Stocks

There are some “sectors, which until now weren’t available to investors” and the government’s move to sell stakes in diverse industries “will be welcomed by both foreign and Indian investors,” said Harsha Upadhyaya, a fund manager with UTI Asset Management Co., who manages about $1.1 billion in equities.The Bombay Stock Exchange’s BSE-PSU Index of 48 state-owned stocks climbed 81 percent in 2009 after Prime Minister Manmohan Singh’s Congress party won a second five-year term in May without the support of communist parties, which had stalled previous initiatives to sell state-owned assets.

“We have 60 unlisted companies and 8 listed ones,” under consideration, Mitra said without giving a timeline. The government raised 396 billion rupees from stake sales since 1991, according to the department’s Web site.NMDC may submit share-sale documents to the market regulator in the last week of January, Mitra said. The government is selling an 8.38 percent stake.

Singh in November changed a rule allowing sale proceeds to be used to fund social programs and infrastructure, helping trim the deficit. Previously the government had to invest the money in bonds and stocks.Singh’s cabinet on Nov. 5 approved a plan requiring all profitable state-run companies in which the government holds a more than 90 percent stake, to ensure that 10 percent of the shares are in public hands.

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