India to Raise $3.2 Billion Selling Shares in 3 Power Companies

Dec. 3 (Bloomberg) -- India plans to raise as much as 150 billion rupees ($3.2 billion) selling shares in three state-run electricity companies to help fund spending on roads and ports in Asia’s third-largest economy.

The government expects to raise as much as 60 billion rupees from the sale of shares in NTPC Ltd, India’s biggest power producer, and an equal amount from selling a stake in Rural Electrification Corp., Power Ministry Secretary H.S Brahma told reporters in New Delhi yesterday.

Prime Minister Manmohan Singh’s government plans to spend $8.95 billion in the year ending March to build networks of roads and telephones, power plants and irrigation facilities to help boost economic growth. The government resumed asset-sales after Singh won a second term without support from his former communist allies, who had foiled previous disinvestment attempts.

“Inclusive growth will become a reality if implementation acquires priority,” said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai. “It is good if they use funds from stake sale for programs to build physical and social infrastructure.”

India in November changed a rule allowing proceeds from share sales to be used to fund social sector programs and infrastructure, helping trim the government’s budget deficit. The $1.2 trillion economy expanded 7.9 percent last quarter as the government increased spending. Gross domestic product may grow 7 percent in the year to March, Finance Minister Pranab Mukherjee said on Nov. 30.

Power Projects

Brahma said the government also plans to raise about 30 billion rupees from selling a stake in Satluj Jal Vidyut Nigam Ltd., a producer in the northern state of Himachal Pradesh. Rural Electrification, which lends to power projects in the nation’s villages, has tripled this year, making it the second-best performing stock among Indian state-run companies.

Rural Electrification’s shares rose 2.1 percent to 257.5 rupees in Mumbai yesterday. NTPC fell 0.7 percent to 209.05 rupees. The government owns about 90 percent of NTPC and 82 percent of Rural Electrification, according to data compiled by Bloomberg. Satluj Jal is owned by the central government and the government of Himachal Pradesh state.

India has 60 state-run companies including Steel Authority of India Ltd. and Coal India Ltd. in which it can sell stakes to raise funds, Sunil Mitra, secretary for asset sales at the finance ministry, said on Nov. 13.