Investors can expect to get shares of five listed public sector units (PSUs) at a discount from their market prices and be part of equity holding in at least two more state-run companies, since the finance ministry is planning to dilute its stake in seven or eight government companies.
Five of these will be follow-on public offers (FPOs) and two would be initial public offers (IPOs). A decision is to be made on more. The process will begin with disinvestment in Power Finance Corporation (PFC) in May, followed by stake sale in Oil & Natural Gas Corporation (ONGC) and Steel Authority of India Ltd (SAIL), a ministry official told Business Standard.
India’s largest public sector trading company, Mineral and Metals Trading Corporation (MMTC), National Buildings Construction Corporation (NBCC), Rashtriya Ispat Nigam Ltd (RINL) and Hindustan Copper are the other state-owned companies to hit the market with their issues this year. The disinvestment department is in the process of identifying a couple of more PSUs where the government can consider divesting stake.
The government aims to mop Rs 40,000 crore from disinvestment this financial year, the same as the Budget projections of 2010-11. The latter target could not be met, after a slew of offers were deffered.
PFC, ONGC, SAIL, MMTC and Hindustan Copper are already listed entities. So, investors will get a chance to buy these stocks at less than prevailing market prices.
Investors may also look at these stocks currently, since they would rally on the back of the disinvestment plans. Market analysts said this could be an opportune time for investors to look at these counters. While PFC, ONGC and MMTC shares were up 2.27 per cent, 0.68 per cent and 0.27 per cent, respectively, on the Bombay Stock Exchange on Wednesday, SAIL was down three per cent and Hindustan Copper fell 0.9 per cent.
The official, who did not wish to be named, said there had been discussion on disinvestment of Cochin Shipyard, but nothing had been decided. And, that stake sale in Indian Oil Corporation (IOC) has been put on the backburner for the moment. If at all, the ministry would consider it only towards the end of this financial year.
“We may not be able to do more than eight issues this year. We will start with PFC in the first week of May,” the official said.
He, however, added that the department was looking at all profitable unlisted companies. The Cabinet has already decided to list every PSU that is profitable.
(in Rs cr)
|*at current market cap; #as on April 6, 2011
Asked whether the government was planning to go for a public issue of Neyveli Lignite Corporation Ltd (NLCL) in the current year, the official said this was never under discussion. It was, in fact, disinvestment in NLCL that had put the whole sell-off plans of the UPA in its earlier stint on the backburner. The government has already approved FPOs of PFC, ONGC, SAIL and Hindustan Copper. It will dilute five per cent stake in PFC and ONGC, while SAIL will see a total dilution of 10 per cent, in two tranches. In Hindustan Copper it will disinvest 10 per cent of its equity.
ONGC, the biggest issue of the year, is likely to fetch the government about Rs 12,650 crore at the current market capitalisation. It is likely to get Rs 1,450 crore from PFC, Rs 3,600 crore from SAIL (in the first tranche) and Rs 2,800 crore from Hindustan Copper.
PFC, SAIL and Hindustan Copper will also issue fresh equity that will increase the size of the FPOs, but the proceeds to be used by the companies will not form part of the government’s disinvestment target. The government may divest 10 per cent each in NBCC and RINL.
MMTC, among the highest foreign exchange earners, will also come up with an FPO. The company has very little public float at present, with the government holding 99.33 per cent in it. A 10 per cent year disinvestment in MMTC could fetch the government about Rs 9,000 crore. However, concern has been raised that it would be difficult to arrive at a right valuation for the company, as its limited floating stock does not reflect a true value.
The government had Rs 22,744 crore from disinvestment proceeds in 2010-11, against a target of Rs 40,000 crore. It divested stake in six companies—SJVNL, Engineers India Ltd, Coal India Ltd, Power Grid Corporation of India Ltd, MOIL and Shipping Corporation of India.