NLC India shares drop 5%; non-retail OFS portion subscribed 11%

Shares of lignite mining and power generation maker NLC India Ltd fell 5 per cent in Tuesday's trade, as the offer for sale (OFS) by the government for 3 per cent stake kicked off, with non-retail portion receiving bids for 11.41 per cent of the quota size by noon, data showed. The issue received non-retail bids for 28,47,881 shares against the quota size of 2,49,59,458 shares at an indicative price of Rs 304.97 per share. This is against the floor size of Rs 303 per share, which was set at a 10 per cent discount to NLC India's Monday closing price.

The government, which held 72.20 per cent stake in the Navratna PSU, is looking to offload 2 per cent stake or 2.77 crore shares, with green shoe option of 1 per cent or 1.39 crore shares. A total of 10 per cent of the offer shares are reserved for allocation to retail investors.

Tracking the OFS, shares of NLC India declined 4.66 per cent to hit a low of Rs 320 on BSE. Despite Tuesday's fall, the scrip is up 35 per cent in the past six months. Only non-retail investors are allowed to place their bids today. Retail investors can bid tomorrow, June 10.

The OFS came after the government raised a total Rs 12,165.85 crore from three PSUs namely Central Bank of India, Coal India Ltd and NHPC India Ltd in the past few weeks. 

Up to 25,000 shares will be offered to the eligible employees of the NLC India, in accordance with the terms and conditions provided in the OFS guidelines, or any other limit as may be approved by the competent authority. 

Analysts noted that NLC India has ambitious capacity expansion plan, aiming to increase its current mining capacity from 50 MTPA to 104 MTPA by 2030, thermal power capacity from 5,960 MW to 10,020 MW, and RE capacity from 1,734 MW to 10,110 MW. 

These capacity additions, Axis Securities on May 29 said, will require a substantial capex of Rs 1.01 lakh crore, which is expected to drive growth in both regulated and non-regulated equity. 

"We raise our Ebitda estimates for FY27/28, led by full-year contribution from all three Ghatampur units (1,980 MW) with Unit III COD (Jun’26), 2 mtpa additional merchant coal from Pachwara Coal block, and structural improvement in TPS-II under-recovery with Unit I availability exceeding 90% post-modification and near-zero under-recovery guided for full-year FY27," it said.

The brokerage valued NLC's conventional thermal business at 1.8 time, regulated mining business at 2.5 times Mar’28E regulated equity, RE business at EV/Ebitda of 6.5 times March 2028 Ebitda, and the merchant coal business at 7 times FY28 EV/EBITDA. It suggested a target of Rs 385/share on the stock.