The Hindu Business Line : NTPC issue attracts 14 lakh retail investors

According to an investment banker, retail investors are learning to trust markets again and are here to stay "provided no (other scam) burns their fingers again".

Mumbai , Oct. 15

RETAIL investors are back in hordes. The public offer for sale of 10.5 per cent equity in the Government-owned National Thermal Power Corporation has attracted more than a million retail investors - higher than any other public issue this year.

Over 1.41 million retail investors subscribed for the NTPC issue that closed yesterday, a clear indication that the great Indian middle class may be learning to trust the stock market again. Comparatively, ONGC issue attracted only 5.67 lakh retail investors, the TCS public issues saw more institutional investors and high networth individuals lining up for it.

The NTPC issue, which aims to raise around Rs 5,360 crore by selling equity in India's largest power generation company, saw its retail share 3.79 times oversubscribed.

"After the NTPC issue opened, our branches in many places in Gujarat were flooded with interested investors. This bodes well for future public issues. This turnout reminds us of the times before the 1990s stock market scams when retail investors had begun turning towards the stock markets in a big way," said Mr S. Mukherjee, Managing Director and CEO, ICICI Securities, lead managers to the issue.

According to another investment banker, retail investors are learning to trust markets again and are here to stay "provided no (other scam) burns their fingers again".

"This is also a signal that retail investors are waiting for reasonably good public issues. NTPC was a good issue for the public because it clearly has fewer risk factors, in that unlike an ONGC where returns are linked to oil price volatility and subsidy burden or TCS where a lot depends on outsourcing trends. NTPC is a culmination of growing investor interest," said a banker.

NTPC hopes to use the money raised from selling these shares for adding six new power generation projects that will increase its total generation capacity by 6,690 MW. The projects will be funded through a 70:30 debt to equity ratio, according to the offer document. The company currently produces 26.7 per cent of the total power generated in India. The company's total income for the year ended March 31, 2004 was Rs 25,964 crore. The company had recorded a net profit of Rs 5,260 crore.