NHPC Shares Tumble Over 4% as Government Announces Offer for Sale at Discounted Price

Before Market Opens
18 January, 2024

The decline in NHPC’s share price by more than 4% was primarily due to the Indian government’s announcement of an offer for sale (OFS) of the company’s shares. Here are the key details of this event:

1. **Stake Sale Percentage and Structure**: The Indian government planned to sell up to 3.5% of its stake in NHPC. This included a base offer to sell 2.5% of the company’s equity, with an option to sell an additional 1% if there was sufficient demand.

2. **Floor Price**: The floor price for the OFS was set at ₹66 per share. This price represented a discount of approximately 9.66% compared to NHPC’s closing share price on the day before the offer was announced.

3. **Offer Dates**: The offer for sale was scheduled to open for non-retail investors on January 18, 2024, and for retail investors, as well as non-retail investors who wished to carry forward their un-allotted bids, on January 19, 2024.

4. **Funds Raised**: The government aimed to raise about ₹2,300 crore through this stake sale. This divestment was part of a broader effort by the government to meet its disinvestment targets.

5. **Market Reaction**: The market’s reaction, resulting in a more than 4% drop in NHPC’s share price, can be attributed to several factors. The discounted floor price of the OFS likely influenced market perceptions of the stock’s value. Additionally, the increase in stock supply due to the government’s stake sale may have contributed to downward pressure on the stock price.

6. **Background**: This stake sale was a part of the Indian government’s larger divestment strategy. However, reports indicated that the government was likely to miss its divestment target for the fifth consecutive year.

7. **Employee Offer**: Additionally, it was mentioned that a portion of the offer shares (up to 3%) might be made available to eligible employees of NHPC following the completion of the offer, subject to approval from competent authorities.

This event highlights the sensitivity of stock prices to government actions, especially in public sector companies where the government holds a significant stake. The offer for sale and the discount on the floor price were key factors influencing the stock’s performance on the market.

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