The government is selling upto 5% stake (3%+2% green shoe portion) at a floor price of Rs 94 a piece in Neyveli Lignite (NLC) through a two-day offer for sale beginning 25/10/17, as per media report. The NLC India Limited OFS issue will open for institutional buyers on Wednesday. The OFS comes after mega OFS of NTPC on 29/8/17 which fetched Rs. 9700 crore to the Government.The 5 per cent stake sale through NLC India Limited OFS would fetch about Rs ~720 crore to the exchequer.
Close of OFS : Those who bid at Rs. 96 are likely to get allotment. NLC India share hit a high of 102.4 today and closed at Rs. 95.6.
About NLC India Limited OFS
|Issue Period||25 Oct 2017 to 26 Oct 2017|
|October 25, 2017 for Non Retail Investors and October 26 ,2017 for Retail Investors and Non Retail Investors who choose to carry forward their bids|
|Offer Size – No. of Shares||Total including Geenshoe: 7,64,28,421 shares|
|Base Offer Size – 45857053 shares and Greenshoe Option 30571368 shares|
|Total Offer Size in Rs.||718.43 crore at Floor Price|
|Offer Size for Retail Investors||Offer Size – 1,52,85,684 shares|
|~ 144 Crore|
|Floor Price||Rs. 94 with 3.5% discount to Retail|
|Allocation Methodology||Price Priority|
Retail investors, for whom 20 per cent of the Neyveli Lignite Corporation OFS would be reserved, will get a further discount of 3.5 per cent in the offer for sale (OFS). Retail investors are those who put in bids for less than Rs 2 lakh.
About NLC India Limited (Neyveli Lignite Corporation) :
- Neyveli Lignite Corporation (NLC), incorporated in 1956, is the business of lignite mining and power generation. It is a NAVRATNA company under the Ministry of Coal
Neyveli Lignite Corporation is a Miniratna Public Sector Enterprise, under the administrative control of Ministry of Coal. The company also operates subsidiary –– NLC Tamilnadu Power Limited.e
- Present Mining Capacity : 30.6 MTPA ( Lignite )
Present Power Generation Capacity (including JVs) : 3240MW (Lignite), 1000MW (Coal), 10MW (Solar), 51MW (Wind), Total :4301MW
- Planned Capacity Addition
Mining Lignite 31.55 MTPA Coal 31.00 MTPA Power Generation(including JVs) Lignite Based 3540 MW Coal Based 5940 MW Solar 3990 MW Wind 203 MW Acquisition of Power Assets 3000.0 MW Total 16673 MW
- Post-disinvestment, the Government of India’s shareholding in NLC will come down to 84.32%.
Subscription – Non retail Portion:
Government approved disinvestment of 3% equity shares of NLCIL as base offer, with an option to retain oversubscription up-to additional 2% equity shares. Trading for Non-Retail portion took place on 25th October, 2017 at a floor price of Rs. 94. Against the offer size of 3.67 crore, bids were received for 11.63 crore shares, resulting in over subscription by 3.19 times. Government accordingly decided to retain the over-subscription by revising the total offer size from 3% to 5% of equity shares.
A) NLC India Limited Quarterly Results
|NLC India LImited Quarterly Results : ( Rs. Cr.)|
|EPS (Unit Curr.)||2.07||9.82||2||1.79||1.38|
B) Annual Results (Figures in Rs. Crore):
|Profit Before Tax||2289.27||705||2383.33||2209.13|
|Minority Interest (after tax)||9.66||-17.6||0||0|
|Net Profit after Minority Interest||2447||85.57||1579.68||1501.88|
|Adjusted Net Profit||3479.38||-28.45||1348.06||1532.18|
|Equity Dividend (%)||73.4||30||28||28|
Assessment: NLC India Limited OFS
- The main activity of NLC India is mining (coal and lignite) and power generation of thermal and renewable energy.
- NLC India key Products/Revenue Segments include Power which contributed Rs 6258.97 crore to Sales Value (93.57 % of Total Sales), Lignite which contributed Rs 401.24 crore to Sales Value (5.99 % of Total Sales) . It has set up a 10 MW pilot solar power plant and now plans to build a 500 MW plant.
- Power Stocks have been doing reasonably well on the bourses.
- NLC paid good dividend (~74%- Rs. 7.4) last year.
- Shares of NLC have been trading in a close range near to the floor price for quite some time and OFS issue was expected by the market for upto 15% stake sale from 2-3 months. Thus NLC India Limited could exhibit a reasonable level of price support and chances of an upward mpovement are more than a downward trend.
- Reduction of Retail discount from 5% to 3.5% has reduced the differential available to retail.
- The size of NLC India Limited OFS issue being small with retail portion at ~144 crores, allotment at reasonable price in bidding will be difficult.
- I intend to apply in NLC India Limited OFS to get a allocation at the most at marginally above the floor price with expectation of reasonable return in short to medium term.
Standard disclaimer: I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.