Share price of hydroelectric company SJVN surges by 8% following partnership and government plans to sell shares

Profit decline and decreasing revenues impact SJVN’s performance as government prepares to sell PSU stocks

In a bid to raise funds and boost the economy, the Indian government is gearing up to sell a significant portion of its shares in Public Sector Undertakings (PSUs). One such PSU that is in the spotlight is SJVN, as the central government plans to sell 4.9% of its shares through an offer for sale (OFS) on September 21. This move comes at a time when the company’s share prices have been on the rise, reaching a high of INR 75 on the Bombay Stock Exchange. However, the minimum issue price for the OFS has been set at INR 69, which is lower than the current market price.

SJVN, formerly known as Satluj Jal Vidyut Nigam, is a joint venture between the government of India and the government of Himachal Pradesh. The company is involved in the generation and sale of hydroelectric power in India. Its operations span across the country, with projects in Himachal Pradesh, Uttarakhand, Bihar, and other states. The company has also been exploring opportunities in the renewable energy sector.

The rise in SJVN’s share prices can be attributed to the company’s recent partnership with Power Finance Corporation (PFC). SJVN signed a Memorandum of Understanding (MoU) with PFC for financial assistance, leading to increased investor confidence. The partnership with PFC is expected to provide financial support for various projects, including renewable energy and thermal power generation, at an estimated cost of INR 118,826 crore. This collaboration is seen as a positive move for SJVN, as it will help the company expand its operations and diversify its portfolio.

Investors have taken notice of SJVN’s potential, with the company’s shares experiencing significant increases in the past three months. In fact, the stock has seen a remarkable rise of 106% in just three months and an impressive 136% over the past year. This upward trend in share prices has attracted both retail and institutional investors, who are optimistic about the company’s future prospects.

However, despite the positive market sentiment, SJVN’s financial performance in the last quarter has not been as rosy as expected. The company’s net profit has decreased by 55%, with a remaining profit of INR 271.75 crore. Furthermore, its total revenue has declined by 30.6% to INR 744.39 crore. These figures indicate that SJVN is facing challenges in maintaining its profitability amidst a volatile market.

The government’s decision to sell a significant portion of its shares in SJVN at a lower price has raised eyebrows among investors. The minimum issue price for the OFS has been set at INR 69, which is lower than the current market price of INR 75. This discounted price has sparked concerns among shareholders, as it could potentially dilute the value of their investments. However, the government’s move can be seen as a strategic decision to attract more buyers and ensure a successful divestment.

SJVN is not the only company where the government plans to divest its shares. Several other PSUs are also on the government’s radar for disinvestment. This move comes at a time when the Indian economy is grappling with the impact of the COVID-19 pandemic. The government is under pressure to generate funds to address the economic challenges posed by the pandemic, including job losses and a decline in GDP growth.

PSU stocks have traditionally been considered safe investments due to the government’s backing. However, recent developments have made investors cautious about these stocks. The declining prices of PSU stocks, coupled with the government’s decision to sell its shares at a lower price, have raised concerns among investors.

One such PSU that has faced the brunt of investor skepticism is Power Finance Corporation (PFC). PFC, which is a government-owned NBFC (Non-Banking Financial Company), has seen its share prices decrease in recent years. However, in the past five years, PFC shareholders have still experienced substantial gains, with a 170% increase in share price. This indicates that despite the fluctuating market conditions, PSU stocks can still deliver decent returns in the long run.

Investors are closely monitoring PSU stocks, including SJVN, as the government plans to sell a significant portion of its shares at a lower price. While this move may create short-term volatility in the market, it also presents an opportunity for investors to buy these stocks at a discounted price. The government’s divestment program is expected to attract both retail and institutional buyers, who are looking to capitalize on the potential growth of these companies.

Overall, the government’s decision to sell PSU stocks Amid Decreasing Prices reflects its efforts to raise funds and stimulate economic growth. While there are concerns about the impact of the divestment on shareholder value, this move presents an opportunity for investors to acquire stocks at a discounted price. The success of the government’s divestment program will depend on market conditions and investor sentiment. As the Indian economy recovers from the impact of the pandemic, the government’s divestment program could play a crucial role in rejuvenating the market and attracting much-needed investments.

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