NTPC prices at top of range

India''s state-owned power generator will raise $1.2bn from IPO.

India's National Thermal Power Corporation priced its initial public offer at the top of the indicated range over the weekend after a strong response from investors. The sale's undoubted success has helped prove the mettle of India's new government and some believe it could mark the start of a bull market for Indian equities.

Investors snapped up the deal in less than half an hour even after the company's underwriters - Kotak Mahindra Capital, ICICI Securities and Enam Financial Consultants - priced the shares at the top of a Rs52-Rs62 price band. In fact, eager punters placed 11.2 billion orders for the 865.8 million shares on offer; enough demand to sell the deal 13 times over.

After listing, which takes place on November 5, NTPC will still be a state-owned company. The sale represents just 10.5% of the company, leaving the government with the remaining 89.5% stake.

The total proceeds, most of which will go to the government, amount to Rs53.7 billion ($1.17 billion). That means the government has beaten its annual disinvestment target at a canter: the total proceeds promised for the year to April 2005 was just Rs40 billion. There is even a chance the government could beat last year's record-breaking haul by Arun Shourie's disinvestment ministry: Rs145 billion.

The government is thought to have plans next to sell stakes in Power Finance Corporation, Power Grid Corporation, Allahabad Bank, Bank of Baroda and Shipping Corporation of India. These sales are now much more likely thanks to the success of NTPC.

The socialists who support the governing coalition are satisfied that India's crown jewels are not being flogged to the highest bidder, the exchequer is raking in cash to pay for the government's infrastructure plans and social programmes, and financial market participants are reassured that this is a government with which they can do business.

Indeed, some market participants are even predicting a bull run. The strong demand from retail investors, they say, demonstrates a return to the broad-based confidence that greeted the economic reforms of Manmohan Singh's finance ministry in the early 1990s. Unlike the recent big offers from Tata Consultancy Services and Oil and Natural Gas Corporation, NTPC's retail book was large - the offer was split 50:50 between retail and institutional investors - and heavily over-subscribed, with orders totaling 3.8 times the shares on offer. Institutional and high net-worth individuals over-subscribed the rest of the deal by 15 times.

The offer is expected to open trading at a significant premium to its offer price, perhaps as much as Rs72.