SJVN Offer For Sale (OFS) Now Open: Government to sell 4.92%, SJVN falls 10%

In a strategic move, the government is set to sell a 4.92% stake in SJVN (Satluj Jal Vidyut Nigam) at a floor price of ₹69 per share through a two-day Offer for Sale (OFS), as confirmed by an official source. Non-retail investors can participate in the OFS on September 21 and Retail investorswill have the opportunity to bid on September 22. Notably, this price represents a 15.6% discount compared to the closing price on Wednesday. Around 25% of the offering is allocated for mutual funds and insurance companies, while the remaining 10% is set aside for individual retail investors. If the OFS is fully subscribed, including the greenshoe option, the government could raise approximately ₹1,600 crore through this stake sale.

Ownership Stake After Divestment

As of the June quarter, the government held an 86.77% stake in SJVN. Even after the 4.92% stake sale, the government will retain an 81.85% stake in the company, exceeding the minimum public shareholding norms of 75% for promoter stake by around 6%.

The sale of the government's 4.92% stake in SJVN is expected to help the government meet the minimum public shareholding requirements set by the capital market regulator, as indicated in the exchange filing. These norms mandate that listed companies maintain a minimum 25% public shareholding. Currently, the federal government owns 59.92% equity in SJVN, while the northern state of Himachal Pradesh holds 26.85%. SJVN's board is scheduled to meet on Saturday, September 23, to discuss raising funds through asset securitization, further underlining the company's financial plans.

This move is part of a broader strategy by the government to unlock value from its stakes in various PSUs (Public Sector Undertakings). As per the report, there are 21 PSUs in which the government holds more than 75% stake, potentially unlocking as much as ₹1.9 lakh crore for the central government. To put this development in perspective, it's worth noting that the Indian government has raised 56 billion rupees through stake sales in state-run firms in the fiscal year 2023/24, with a target of 510 billion rupees.

Collaboration with Power Finance Corporation

On a positive note, SJVN signed a Memorandum of Understanding (MoU) with Power Finance Corporation Ltd. (PFC) earlier. This MoU encompasses a diversified portfolio of projects, primarily focusing on renewable energy and thermal generation projects.

In a separate development, SJVN Ltd entered into a trade agreement with Sikkim Urja Ltd (SUL) for the supply of 180 megawatts (MW) of hydropower. Under this agreement, the power generated will be supplied to distribution licensees and open-access consumers. This agreement was formalized through a memorandum of understanding (MoU) for power trading.

The Central Electricity Regulatory Commission (CERC) had previously granted a category-I license for inter-state electricity trading to SJVN. Nand Lal Sharma, the Chairman and Managing Director (CMD) of SJVN expressed that this MoU will contribute to the growth of the company's trading business and aligns with the central government's goal of providing 24x7 power to all.

Notably, SJVN shares have performed remarkably well, surging by 135% year-to-date, marking the first time the stock has achieved such growth in a calendar year. SJVN's stock had previously hit a 52-week low of ₹29.90 on September 30, 2022.

SJVN Q1 Performance

In the June quarter, SJVN reported a significant decrease in its consolidated net profit, which fell by over 55% to ₹271.75 crore. This decline was primarily attributed to lower revenues compared to the same quarter in the previous year when the company had reported a consolidated net profit of ₹609.23 crore.

The company's total income also experienced a decline, dropping to ₹744.39 crore in the first quarter of the current fiscal year from ₹1,072.23 crore in the corresponding period of the previous year.