Government to Divest 7% Stake in NLC India

March 8, 2024

The Government of India is set to offload a 7% stake in state-run lignite producer NLC India Ltd. through the offer-for-sale (OFS) route, which includes a green shoe option of 2%. The OFS is expected to rake in approximately ₹2,058 crore, even if the 7% stake is offloaded at the floor price set for this sale.

The government’s decision to divest a 7% stake in NLC India through the OFS route is a significant move towards achieving its divestment targets for the current fiscal year. The OFS is expected to generate substantial revenue for the government while ensuring compliance with regulatory norms. The participation of both institutional and retail investors in the OFS will be closely watched by market participants.

OFS Details and Timeline

The OFS will open on March 7, 2024, for non-retail investors, while retail investors can bid on March 11, 2024. The floor price for the offer is set at ₹212 per equity share, which is at a discount to the closing price of the company’s share (₹226.7 apiece).

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

Government’s Stake and Regulatory Compliance

The government currently holds a majority stake of 79.2% in NLC India. The OFS is expected to reduce the government’s ownership below the 75% threshold, aligning with regulatory requirements and ensuring compliance with Minimum Public Shareholding (MPS) norms set 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), the green arm of NLC India, has signed a Power Purchase Agreement (PPA) with Gujarat Urja Vikas Nigam Limited (GUVNL) for a 600 MW Solar Power Project. NLCIL secured the project in the Gujarat State Electricity Corporation Limited (GSECL) Khavda Solar Park tender through a competitive bidding process.

Disinvestment targets

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

During the current fiscal (2023-24), the revised estimates of disinvestment mop-up has been pegged at Rs 30,000 crore, lower than Rs 51,000 crore budgeted at the time of presentation of Budget last year.

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