In a significant move, SJVN Ltd.’s board has given its in-principle approval to monetize a portion of the earnings generated by the Nathpa Jhakri Hydro Power Station (NJHPS). This monetization will be achieved through the securitization of the station’s future Return on Equity (RoE). The decision was made during a board meeting held on Saturday, September 23, and represents a strategic financial maneuver by the company.
What is RoE and Securitization?
Return on Equity (RoE) is a financial metric that measures the returns generated on a company’s net assets. In this case, the RoE of NJHPS will serve as the basis for the monetization process. Securitization involves grouping debts into portfolios, essentially bundling income-raising assets together and converting them into a single security. In the context of NJHPS, this will allow the company to leverage its future RoE for financial gain.
Oversubscribed Offer-for-Sale (OFS)
This development follows closely on the heels of SJVN’s successful offer-for-sale (OFS) the day prior. The government’s offer to divest a 4.92 percent share in the state-owned power producer garnered significant investor interest. Institutional investors placed bids for over 20.91 crore shares, surpassing the 8.70 crore shares initially reserved for them.
The government’s plan included selling a 4.92 percent stake, equivalent to 19.33 crore shares, in SJVN at a floor price of ₹69 per share during the two-day OFS. This floor price represented a 15.6 percent discount compared to the previous day’s closing share price of ₹81.75 on the BSE.
Strong Response from Non-Retail Investors
Non-institutional investors (NIIs) displayed strong interest in the SJVN OFS, subscribing to it more than twice over. At an indicative price of ₹69.64 per share, the cumulative value of bids placed by NIIs exceeded ₹1,450 crore.
Tuhin Kanta Pandey, the Secretary of the Department of Investment and Public Asset Management (DIPAM), expressed enthusiasm over the response, stating, “Offer for Sale in SJVN received enthusiastic response from non-retail investors today. The issue was subscribed 2.4 times of the base size. Govt has decided to exercise the green shoe option.” The government is expected to raise more than ₹1,300 crore from this share sale.
Boost to Government’s Disinvestment Efforts
The proceeds from the SJVN stake-sale will bolster the government’s disinvestment efforts for the current fiscal year. To date, the government has already raised over ₹5,600 crore through the sale of minority stakes in Central Public Sector Enterprises (CPSEs). Notably, the government currently holds an 86.77 percent stake in SJVN.
On Friday, September 22, SJVN’s shares opened at ₹69.60 and saw an increase of approximately 5 percent, reaching an intraday high of ₹74.03. The stock ultimately settled 1.67 percent higher at ₹72.27 per share on the BSE. This rebound came after a 13 percent decline in the stock’s price the previous day.
Despite recent fluctuations, SJVN’s stock has shown impressive growth in 2023, surging by nearly 110 percent year-to-date. It has also demonstrated remarkable resilience compared to its 52-week low of ₹29.90, which was recorded on September 30, 2022.
In terms of financial performance, SJVN reported a decline of over 55 percent in its consolidated net profit, which amounted to ₹271.75 crore in the June quarter of FY24. Additionally, the company’s total income decreased to Rs.744.39 crore in the first quarter of the current fiscal year, down from Rs. 1,072.23 crore in the same period the previous year.
As SJVN embarks on its securitization plan for NJHPS earnings, the company’s future financial outlook and strategic maneuvers will be closely monitored by investors and industry observers alike.