NHPC Ltd saw its IPO worth up to $1.25 billion fully subscribed soon after opening to investors on Friday in a strong response that may embolden the government to sell stakes in more firms.

Robust investor demand for NHPC, the first IPO by an Indian state company in 18 months, means the deal is likely to be priced towards the top of its indicated range.

"The response was expected, as its the first IPO from a PSU (public sector undertaking) after a long time and we could expect the shares to be listed at a decent premium," said Ambareesh Baliga, vice-president of Karvy Stock Broking.

By 11:05 a.m the 1.68 billion share offering was subscribed 1.05 times, the National Stock Exchange said.

Another state heavyweight, Oil India Ltd, is readying a $500-$600 million IPO in September, bankers have said.

"Currently, there is quite a lot of liquidity in the system to support these IPOs, and a good response was expected," said Amitabh Chakraborty, president of equities at Religare Capital.

NHPC follows private-sector utility Adani Power, which raised about $630 million recently in an IPO that was fully subscribed within an hour of opening. Adani Power's IPO was eventually more than 20 times subscribed.

Enam Securities, Kotak Mahindra Capital Co and SBI Capital Markets are managing the NHPC deal.

Indian companies have raised about $8.5 billion through share sales so far this year, surpassing the total for all of 2008, level powered by a sharp rally in the stock market that has been fuelled by an influx of foreign funds.

India's benchmark index has risen over 90 percent percent from lows in early March, driven by around $9 billion in net foreign fund inflows into the country's shares.

At least a dozen state-run firms are considering either IPOs or follow-on offerings as they gear up for expansion in Asia's third-largest economy.

"All PSU IPOs have been well received and have generally reaped good return to investors in the long run," said Chakraborty.

The government is coping with a 16-year high fiscal deficit and has announced a record $90 billion borrowing plan. A sell-down in stakes in state-run companies is expected to be seen by debt investors as a sign of fiscal responsibility and commitment to reform.

Analysts said it was no surprise that NHPC drew so much interest as its price range of 30 rupees to 36 rupees represented a valuation of roughly 2 times its book value, or half the level of listed peers.

NHPC has an installed capacity of 5,175 megawatts and is building another 4,622 megawatts, and its proven ability to complete projects also made its IPO popular, analysts said.

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