India’s largest power producer, government-owned NTPC Ltd, has said it will acquire entire central government stakes in two hydropower companies THDC India Ltd and North Eastern Electric Power Corp. Ltd (Neepco) for Rs 11,500 crore ($1.54 billion at current exchange rate).
While NTPC will buy 100% of Neepco for Rs 4,000 crore, it will acquire a 74.4% stake in THDC for Rs 7,500 crore.
The capital market regulator sees the deals as related-party transactions and has therefore exempted them from open offer provisions.
The to-be acquisitions come as the government aims to shore up its revenues by disinvesting assets either to the private sector or to bigger public sector entities like NTPC.
The announcement comes after the Union Cabinet in November 2019 okayed government stake sale in the two entities besides three other public sector undertakings including Bharat Petroleum Corporation Ltd (BPCL).
Neepco is a mini-ratna Category-I central public sector enterprise. It has an operational portfolio of 1,457 megawatt (MW) comprising hydropower generation capacity of 925 MW, gas-based generation capacity of 527 MW and solar generation capacity of 5 MW. Additionally, a 600 MW Kameng hydroelectric project is likely to be commissioned soon.
THDC is a joint venture of the central government and the government of Uttar Pradesh. It is a mini-ratna Category-I central public sector enterprise.
The firm has an operational portfolio of 1,513 MW comprising a hydropower generation portfolio of 1,400 MW and wind-power generation portfolio of 113 MW. Further, it has projects with aggregate capacity of 2,838 MW (1,468 MW hydro power, 50 MW solar power and 1,320 thermal power) under various stages of implementation.
This is not the first instance of the Indian government trying to shore up its divestment revenues by selling some public sector units and banks to other bigger government entities.
In 2018, the government sold its stake in Hindustan Petroleum Corp. Ltd (HPCL) for Rs 36,915 crore to state-run Oil and Natural Gas Corp. (ONGC), which accounts for 73% of India’s oil and gas output.
In January 2019, IDBI Bank said Life Insurance Corp of India (LIC) completed the acquisition of 51% controlling stake in the public sector lender.
In March last year, Power Finance Corp Ltd (PFC) completed the purchase of a controlling 52.63% stake in state-run peer REC Ltd, paying Rs 14,500 crore to the central government for the shareholding.
In the current situation, the government hopes to garner Rs 65,000 crore via divestment proceeds during the current financial year ending 31 March, but it has managed to collect close to Rs 32,964 crore so far, with only a few days left before the year closes.
If the current deal materialises before 31 March, the collection will bump up to Rs 44,464 crore, still short of the divestment target of Rs 65,000 crore.
Now, with the country in a coronavirus lockdown from 25 March until 14 April, it is unlikely that the government will meet its disinvestment target which had been revised downwards from Rs 1,05,000 crore for 2019-20.