The finance ministry will send a proposal for disinvestment in NHPC to the Cabinet by the end of this month and the issue, which may fetch over Rs. 2,000 crore to the exchequer, is likely to hit market in August.
"In another seven days we will finalise the Cabinet note and send for approval," official sources said, adding that the disinvestment department is planning to bring the issue to the market as early as next month.
The department has already chosen Credit Suisse, HSBC and SBI Capital for managing the share sale in the hydel power producer.
The government plans to sell 11.36% of its stake in NHPC, or 120 crore shares, through an Offer for Sale (OFS) in the domestic market.
At the current market price of Rs. 17.95 apiece, the stake is valued at about Rs. 2,154 crore.
The government currently holds an 86.36% stake in NHPC. The hydro-power generator was listed on the bourses in 2009 after the promoter divested a 5% stake and the company issued 10% fresh equity.
The paid-up equity capital of the company, as of March 31, 2012, was Rs. 12,300.74 crore.
While the Disinvestment Department is eager to offload shares in NHPC, the power ministry has been asking for time, citing valuation issues.
Up to 10% of the OFS would be reserved for the company's employees and the shares would be offered to them at a 5% discount to the issue price.
The government has been using the OFS route, popularly known as the auction method, to divest its stake in PSUs that are among the top 100 companies as per market capitalisation. It plans to garner Rs. 40,000 crore through disinvestment in the current fiscal.
In this fiscal so far, government has raised Rs. 828 crore through disinvestment in MMTC and Hindustan Copper.