Power Grid share offer subscribed 6.7 times

The 7,000-crore follow-on public offer of shares by state-run Power Grid Corp Ltd received bids for 6.7 times the stock on offer as subscription to the issue closed on Friday.

The government will raise Rs7,600 crore ($280 million) by selling a total of 847.1 million shares, or 17 per cent stake, in the company, as part of the government's plan to raise Rs40,000 crore in the current financial year through divesting stakes in various public sector units.

Demand for the Power Grid offer that ended on Friday added up to about Rs47,500 crore, with strong appetite from both foreign and domestic institutional investors.

Power Grid, the transmission utility under the union power ministry, is issuing 601.9 million new shares, or 13 per cent of the increased share capital, in addition to the 4 per cent stake that the government is selling, to raise funds for capital expenditure.

The demand indicates healthy investor appetite despite Asia's third-largest economy growing at its slowest pace in a decade and political uncertainty in view of a general election in May next year.

The government has targeted raising up to Rs40,000 crore through sale of shares in state-run companies during the current fiscal year ending March, but is still far off the target, due mainly to market uncertainties and differences among the various ministries that own the companies.

The government needs the cash to bring down its widening deficit, which is around 5 per cent of the country's gross domestic product (GDP), against the ceiling of 4.8 per cent. If the deficit is wider than the targeted 4.8 per cent of GDP, India could face a downgrading by global credit-rating agencies, which would affect its prospects of its borrowing abroad.

The government has lined up a few more PSUs such as Coal India Ltd (5 per cent), Indian Oil Corp Ltd (10 per cent) for stake sale, which could take its total divestment earnings during the current fiscal to $2.3 billion.

The Power Grid share sale is India's biggest since February, when state-run power utility NTPC Ltd raised $2.2 billion. Indian companies have raised $8.3 billion by selling shares so far in 2013, against $14.9 billion in all of 2012.