India power sale warms investors

The government's holding in NTPC will be cut to 89.5%

India's major power producer, National Thermal Power Corp (NTPC), has sold out its $1.2bn (£0.67bn) flotation within 15 minutes.

The 865 million share offer is a mix of new shares and sales by the government.

NTPC will use the money from the share sale to feed the growing needs of the country's energy-starved economy.

It is India's second $1bn (£0.56m) stock debut in three months, coming after its largest flotation by software services firm Tata, in August.

'Bright future'

Merchant banking sources said the NTPC offer had attracted bids for 1.1 times the shares on offer, after its launch on Thursday.

The issue, which is due to close on 14 October, will raise 53.86bn rupees ($1.17bn), making it the country's second-largest IPO, and valuing the firm at close to 511bn rupees.

"The future of the power sector is bright in India," said Sanjay Sachdev, managing director of Principal Mutual Fund.

"The strong demand, despite a stiff valuation, reflects the long-term positives of the offer," said Mr Sachdev, whose funds bid for shares.

The company is the the sixth largest power producer in the world.

Government holding

NTPC is the largest thermal power generating company in India, and - till now - was a public sector company wholly owned by Government of India.

It accounts for just over one-quarter of India's power generation, but has faced competition from private utilities such as Reliance Energy, and Tata Power Company.

Bankers said the size of the float had generated demand from foreign fund managers, with half the offer reserved for qualified institutional buyers.

The government's holding in NTPC will be cut to 89.5% after the IPO.

Traders remark by the time the issue closes, it may have been oversubscribed seven to eight times by retail investors and about 15 times by institutional investors.