Shares of NBCC tank on concerns over stake sale valuations

MUMBAI: Shares of state-owned company NBCC declined 11% on Wednesday on reports that the Cabinet has approved 15% stake sale in it at lower valuations. The government is planning to sell 15% in the project management and consultancy company for Rs 1,700 crore, about 18% less than NBCC’s Wednesday’s valuations, said people familiar with the matter. The company’s market capitalisation stood at of Rs 13,788 crore on Wednesday.

In the past, many of the government divestments came at a discount and the stock price usually comes under pressure as investors sell them on hopes that they can buy it later during the offer for sale, said market participants.

“It has been seen before that the PSU stocks see correction ahead of disinvestment as investors offload shares in hopes that they will get the opportunity to buy back these shares at discount in the government offering,” said Rikesh Parekh, VP-markets strategy and equities, Motilal Oswal Financial Services.

In the past, stocks such as National Fertilizers, Engineers India, NMDC, ITDC, Hindustan Copper, and MMTC among others fell up to 25% between announcement date and OFS date.

NBCC stock rose 32% in the past five trading sessions through Tuesday. The company was listed on the bourses in April 2012 when the government diluted 10% stake to raise `127 crore. Since then, the stock has risen over 1226% amid lack of free-float shares and investment by some high profile investors. At present, the government holds 90% stake in the company. As per Sebi’s public listing requirements, government should divest 15% so that company can maintain at least 25% free float.

Earlier, in May this year, shareholders had approved a stock split to facilitate the follow-on public offer under the government’s disinvestment programme. The company has split its share of Rs 10 each into five with a face value of Rs 2 each.