India’s largest power company NTPC has expressed its unwillingness to distribute any special dividend to its largest shareholder (the government of India) out of its existing cash reserves of Rs 20,000 crore.
Refusing to allow the government to dig into its cash surpluses, NTPC in a September 3 letter to the Finance Ministry has cited its massive working capital requirements towards its future plans on power capacity addition as also its foray into nuclear energy as the reason for its inability to pay any special dividends to the government.
NTPC has also told the finance ministry that it would have a negative cash balance in 2012-13 and 2013-14 and therefore “it may be difficult to make internal accruals available for distribution to its shareholders.”
“Any reduction in future earnings may also affect the availability of internal resources for deploying as equity,” the letter stated. “In view of this, the company would not be in a position to declare any special dividends.”
The Department of Disinvestment had written to NTPC on August 25 informing it about the government’s plans on 5 per cent disinvestment in the PSU.
A senior NTPC official said the government wants to conclude the disinvestment process — through a book-building route — in the company before March 10. At the current market price of Rs 210, the disinvestment of 5 per cent paid up equity capital of NTPC will fetch the government close to Rs 8,600 crore.
At Rs 170,000 crore NTPC is the fourth-most valued company in India.
“We have put an ambitious capacity addition target, which could put a strain on our cash flows,” said NTPC chairman and managing director RS Sharma. With an installed capacity of over 30,000 mw, NTPC is expanding its capacity by 22,430 mw by the end of the 11th plan period (March 2012) to become a 50,000 mw company.