NTPC Ltd, the country's largest power generator, is set to launch a follow-on public offer (FPO), with the government divesting 5 per cent equity in the company.
After the government scaled up the power capacity addition target in the current Plan period multi-fold, the company embarked upon a major diversification drive in the entire energy chain.
As the Rs 61,700-crore (Rs 617 billion) PSU readies itself for the issue that is to be launched next week, Chairman and Managing Director R S Sharma tells Sudheer Pal Singh the time is perfect to garner market valuations. Edited excerpts:
You have just returned from an international roadshow for the FPO. How did the investors respond?
We met 42 investors in Los Angeles, London, Boston, New York, etc. We covered 21 investors in New York alone. It would not be proper to name any investor, but the response was overwhelming. The qualified institutional buyers' quota is 50 per cent. And, of the rest, 15 per cent is for high-networth individuals and 35 per cent for retail. We are hoping for significant subscription from global investors.
NTPC is announcing this offer at a time when the climate change debate is at its peak globally. Being the largest power producer, over 80 per cent of which comes from coal, do you think the time is appropriate for a public issue in terms of valuations, especially as environment laws are expected to be stricter?
This is absolutely the perfect time for us to enter the market. What the market is looking for, after all, is growth. We have almost 13 per cent growth year-on-year in capacity addition. The same is reflected in our profit and revenue.
Further, when we launched our IPO in 2004, it was oversubscribed four times. And our dividend payout increases every year when we go in for such a growth. We certainly expect fair valuations by the market. We are entering into low-carbon growth strategy, which includes supercritical and ultra-supercritical technologies, along with renewable.
The government is diluting 5 per cent of its stake in NTPC. Did the company not think of piggy-backing on this to raise fresh equity?
We have worked out our financials and fresh equity is not required at this stage. We are able to meet our entire equity funding through internal accruals. Our equity base is already quite high. If there is any need in the future, we will go to the market again.
Debt-raising, too, is not an issue for us. We have tied up our debt requirement up to 2010-11.
You had a target of adding over 22,000 Mw of power generation capacity in the current Plan period. We understand that only 4,000 Mw of this has been added so far...
While we try to compare the capacity addition figures, we should not forget that we have been working very aggressively in the Eleventh Plan. Most of the orders were placed in 2007. So, naturally, it takes some time for the capacity to come. You will find that, from 2010-11, the capacity addition will be faster.
It takes anything between 36 months and 45 months for a unit to be commissioned. Things will start moving now. Of the capacity we plan to add in the Twelfth Plan, orders for 14,000 Mw will be placed in 2010-11 and around 20,000 Mw in 2011-12. After two years, we will have 35,000-Mw capacity under construction from 18,000-Mw currently.
Your largest equipment supplier is Bharat Heavy Electricals Ltd (BHEL), which has often been pulled up by the power ministry for delays. Is that a concern?
They are doing a good job. We have ensured that BHEL equipment gives 90 per cent Plant Load Factor (the fuel efficiency of a plant). This credit goes to NTPC and, of course, to BHEL as well. It's we who take the best of everything.
NTPC has embarked upon a major diversification drive, with both forward as well as backward integration. Does this diversification recognise that generation is no more a profitable business as it used to be?
Not at all. Our core growth and our entire focus is only generation. We have plans to reach 75,000 Mw by 2017 from 30,000 Mw currently. By this integration, we are trying to manage fuel availability in-house, which is a challenge. To sustain our generation, we have to do this. Also, we are into trading as we want to capture market share there.
But still, there is a concern in the government over the slow pace of development of coal mines allotted to NTPC...
Coal mine development is a long-drawn process. You are required to acquire a lot of land for that. Wherever there is coal, there is a forest. We have to satisfy all the statutory norms for that. Internationally, it takes six-seven years for development of a coal mine and we are going to develop our mines in a time-frame much earlier than that.
Coal is my survival. Why would NTPC sit on it? We aim to meet 27 per cent of our coal requirement on our own by 2017.
What is the status of NTPC's bulk tender for procuring supercritical equipment?
The process is on. Techno-commercial offers have been asked for from bidders. It will be out soon.
