NEW DELHI: Keen to shore up investor interest in its stake sale programme, the government for the first time is considering a proposal to disinvest equity in the state-owned Nuclear Power Corporation of India (NPCIL) as part of its disinvestment programme for 2012-13.
Until now, the strategic area of nuclear power has been kept firmly in the ambit of the public sector, so much so that even private firms are not allowed to invest in it.
But NPCIL now features as a probable candidate for the government’s disinvestment programme, which is expected to focus largely on initial public offerings (IPOs). “Listing is a means of improving corporate governance. We are trying to get as many PSUs as possible to comply with this and are preparing a list of firms that can float IPOs. NPCIL is one such firm,” department of disinvestment secretary Mohammad Haleem Khan told The Indian Express.
Apart from selling the government’s stake, NPCIL could also go in for raising equity from the market to finance its capital expansion plans. The finance ministry is understood to be discussing the proposal with the department of atomic energy (DAE).
Though Khan did not comment on the quantum of disinvestment, sources said the proposed IPO could involve up to 5% disinvestment by the government and could raise about R1,500 crore.
“The question is whether NPCIL can have the type of capital expenditure that they have planned in the next five-year plan from government resources. If they can’t then they will have to create some market mechanism,” Khan pointed out.
NPCIL currently has a production capacity of 4,780 megawatt electrical (MWe) from 20 nuclear reactors. It plans to ramp up its production capacity to 10,800 MWe by 2017 and to 14,580 MWe by 2020-21.
While it has a surplus of Rs 12,000 crore, including cash reserves, and can fund new capacity of up to 10,000 MWe, the company is looking at raising additional financial resources. Till now it has been exploring options such as joint ventures with core sector PSUs, budgetary allocation and long-term credit from lenders.
When contacted, DAE spokesperson SK Malhotra said that he was unaware of any such proposal. The DAE has traditionally been of the view that ceding even a partial stake in NPCIL was unwarranted in view of the strategic significance of the utility.
But the disinvestment secretary is hopeful that the sensitive nature of its activities will not keep NPCIL away from the market. “Whatever is disclosed to international atomic energy bodies can also be disclosed to the common public,” Khan said.
Analysts also believe that NPCIL would find sufficient investors but caution that given its sensitive activities, the government should consider other PSUs for meeting its Rs 30,000-crore target from disinvestment proceeds in 2012-13.
“NPCIL is a quality asset and can find investor interest if it is priced attractively. But as the government has many other alternatives for disinvestment, it needs to be seen if it should aggressively pursue a stake sale in the nuclear power producer,” said Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities.