India's Government Plans Stake Divestment in NLC India Ltd. via OFS

Image depicting India's government planning to divest a 7% stake in NLC India Ltd. through the Offer for Sale (OFS) route
India's Government Plans Stake Divestment in NLC India Ltd. via OFS

The Government of India is poised to divest a 7% stake in the state-run lignite producer NLC India Ltd. via the offer-for-sale (OFS) route, with an additional 2% available through a green shoe option. This strategic move is anticipated to yield around ₹2,058 crore, even if the 7% stake is divested at the floor price stipulated for the sale.

This decision marks a significant step towards meeting the government's divestment targets for the current fiscal year, promising substantial revenue generation while ensuring adherence to regulatory requirements. Market observers will closely monitor the participation of both institutional and retail investors in the OFS.

OFS Details and Timeline:

The OFS will commence on March 7, 2024, for non-retail investors, with retail investors eligible to bid from March 11, 2024. The floor price for the offer is set at ₹212 per equity share, representing a discount to the company's closing share price of ₹226.7 apiece.

The promoter (government) plans to offload up to 69,331,830 equity shares with a face value of ₹10 each, equivalent to 5% of the total paid-up equity share capital, to non-retail investors. An additional 27 million shares will be made available under the greenshoe option.

Government’s Stake and Regulatory Compliance:

Currently holding a majority stake of 79.2% in NLC India, the government aims to reduce its ownership below the 75% threshold through this OFS, ensuring compliance with Minimum Public Shareholding (MPS) norms mandated by the Securities and Exchange Board of India (SEBI).

NLC India Green Energy’s Power Purchase Agreement:

In a separate development, NLC India Green Energy (NLCIL) has inked a Power Purchase Agreement (PPA) with Gujarat Urja Vikas Nigam Limited (GUVNL) for a 600 MW Solar Power Project. Secured through competitive bidding in the Gujarat State Electricity Corporation Limited (GSECL) Khavda Solar Park tender, this agreement underscores NLCIL’s commitment to green energy initiatives.

Disinvestment Targets:

The government has set a disinvestment target of Rs 50,000 crore for the 2024-25 fiscal year in the interim budget, up from the revised estimate of Rs 30,000 crore for the current financial year.

Revised estimates for the current fiscal year (2023-24) place the disinvestment mop-up at Rs 30,000 crore, lower than the initially budgeted Rs 51,000 crore.

By executing this divestment strategy in NLC India Ltd., the government aims to optimize resources while fostering compliance with regulatory standards, thereby advancing its broader economic agenda.

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