The total power generation in India registered a growth of 4.01% in 2012-13 as compared to the previous year 2011-12. However, the country witnesses a deficit in this sector as there is an acute shortage of power. To accelerate the power development in India- National Thermal Power Corporation (NTPC) was established in 1975. NTPC is the largest government owned power generators in India emerging as an ‘Integrated Power Major’ with a significant presence in the entire value chain of power generation business.
Having generated 249.59 billion units of power, the company represents a market share of 27.37% of India’s total power generation in fiscal 2013. It is a government company which was awarded the ‘Navratna’ status in 1997 and was later upgraded to the ‘Maharatna’ status in 2010. The core business of the company is the generation and sale of electricity in India. It also indulges in project consultancy (including services such as engineering, operation and maintenance management, project management, contracts and procurement management, quality management, training and development), power trading, electricity distribution and manufacture of equipment used in the power business.
NTPC has planned to raise Rs 1,000 crore by issuing tax free secured redeemable non-convertible bonds and has an option to retain oversubscription to the tune of Rs 750 crore for issuance of additional bonds, thereby aggregating to a total of Rs 1,750 crore during the fiscal year 2014. The company intends to utilise the money raised through the Issue of bonds for the purpose of funding of capital expenditure and refinancing for meeting the debt requirement in on-going projects, including recoupment of expenditure already incurred.
Business Profile
NTPC has a total installed capacity of 41,794 MW of which 36,320 MW is through directly owned units of the company. This includes 23 power stations comprising of 16 coal-based stations, 6 gas-based stations and 1 liquid fuel-based station across India. It also has 2 renewable energy projects. Its total revenue aggregated to Rs 72,540.79 crore on a consolidated basis in fiscal 2013. Its top 10 customers represent 59.97% of revenue from sale of electricity generated from its directly owned power stations as on March 31, 2013. In calendar year 2013, NTPC ranked as the number one Independent Power Producer (IPP) and energy trader in the world on the basis of asset worth, revenues, profits, and return on capital invested. It has a balance sheet size in excess of Rs 1,00,000 crore.
Highlight of the Issue
| Issuer |
National Thermal Power Corporation |
| Issue Size |
Rs. 1000 cr (Base Issue Size) with option to retain oversubscription upto the shelf limit (being Rs. 1750 cr) |
| Nature of the issue |
Public issue of tax free secured redeemable non-convertible bonds of face value of Rs 1,000 each, in the nature of debentures having benefits under section 10(15)(iv)(h) of the Income Tax Act. |
| Credit Rating |
“AAA" by ICRA & CRISIL |
| Issue Opens |
December 3, 2013 |
| Issue Closes |
December 16, 2013 |
| Issue Price |
Rs 1,000 each bond |
| Tenure |
10 years, 15 years and 20 years from the Deemed Date of Allotment |
| Coupon rate |
Series 1A- 8.41% p.a.; Series 2A- 8.48% p.a.; Series 3A- 8.66% p.a.
(For Category IV) Series 1B- 8.66% p.a.; Series 2B- 8.73% p.a.; Series 3B- 8.91% p.a. |
| Interest Payment |
Annual |
| Min. Application |
5 Bonds (Rs 5,000) and in multiples of 1 bond thereafter |
| Mode of Holding |
Issuance in both Physical or Dematerialised form but trading in Dematerialised form only |
| Listing |
The Bonds are proposed to be listed on BSE and NSE, with the BSE being the Designated Stock Exchange. |
| Depositories |
NSDL and CDSL |
| Debenture Trustee |
IL&FS Trust Company Limited |
| Registrar |
Karvy Computershare Private Limited |
| Quota |
upto 25% of overall issue size* for category III investors and upto 40% of overall issue size* for category IV investors |
Category III
(Individuals & HUF applying more than Rs. 10 Lakh) |
Investors falling under the following categories applying for an amount aggregating to more than Rs 10 lakh across all Series of Bonds in the Issue:
- Resident Individual Investors;
- NRIs applying on a non-repatriation basis only; and
- HUFs applying in the name of karta.
|
Category IV
(Individuals & HUF applying upto Rs. 10 Lakh) |
Investors falling under the following categories applying for an amount aggregating up to and including Rs 10 lakh across all Series of Bonds in the Issue:
- Resident Individual Investors;
- NRIs applying on a non- repatriation basis only; and
- HUFs applying in the name of karta.
|
(*on first come first serve basis to be determined on the basis of date of receipt of applications duly uploaded in stock exchange)
(Source: Issue Prospectus, PersonalFN Research)
OUR VIEW:
PersonalFN is of the view that NTPC tax free bond provides a good investment opportunity as the rates offered are quite decent. Moreover, there’s no restriction on a bondholder to hold bonds mandatorily for a particular period of time. Investors may sell or buy these bonds anytime on the exchanges. Hence investors need not worry much about liquidity in case of immediate need for funds.
The ticket size has been purposefully kept lower for greater retail participation and thus it is well within the reach of retail investors. Further, the quota of 40% reserved for retail investors enhances the chances of getting allotment.
For a person who invests as a category IV investor (i.e. those who invest less than or equal to Rs 10 lakhs) and falls in the maximum tax bracket, gross pre-tax yield is 12.5%, 12.6% and 12.9% for bonds with maturity profile of the series 10 years, 15 years and 20 years respectively. Considering the risk one is exposed to, coupons offered by NTPC (when clubbed with tax exemption benefit) are satisfactory. We believe that NTPC tax free bond is an attractive offering considering the rating profile of the issue and competitive yield (compared to post tax yield on other fixed income instruments) for those in the maximum tax bracket. Considering the present interest rate scenario, it would be prudent to invest in the bond option with a maturity profile of 10 years. However investors, who have a longer investment horizon and seek a higher interest rate, may consider investing in bond options with maturity profile of 15 years or 20 years depending upon their liquidity needs.
In case you wish to invest in the above instrument, you can email us at info@personalfn.com or contact us on 022-6136 1200
Data taken from NTPC Prospectus and Annual Report 2012-13
Add Comments