Govt kicks off disinvestment; SAIL offer over-subscribed

Hopes to rake in Rs 1,714 cr through the disinvestment

Kicking off its disinvestment drive on a positive note, the government's share sale offer in steel major SAIL got over-subscribed today by nearly 1.5 times with almost an hour still left for bidding, ensuring at least Rs 1,500 crore to the exchequer. 

The offer for over 20 crore shares of SAIL received robust response from retail investors, to whom the government offered 5% price discount and reserved 10% or over 2 crore shares. 

The government is selling 5% stake in SAIL through this one-day offer, which received bids for more than 30 crore shares, worth over Rs 2,500 crore, by 2.45 pm itself. 

The bidding was scheduled to continue till 3.30 pm at the BSE as well as the NSE. 

Incidentally, the BSE website data showed the offer as getting over-subscribed 131% at around 2.25 pm, before revising it downward to 69%. Around 15 minutes later, the data on both BSE and NSE websites showed the offer getting over-subscribed. 

The retail segment was over-subscribed 1.28 times, while non-retail segment was over-subscribed 1.5 times as on 2.45 pm, taking the total subscription level of over 20 crore shares at 1.48 times. 

The SAIL offering is the first PSU share sale undertaken by the new government, which targets to raise Rs 58,000-crore by selling stakes in various state-owned firms during the current fiscal. It is also first disinvestment during the current fiscal. 

It is probably the first OFS in which the stock exchanges are showing the retail and general category subscription with their respective indicative price separately. 

The floor, or the minimum offer, price for SAIL's share sale has been set at Rs 83 apiece, which is 2.75% less than yesterday's closing price. 

At the floor price of Rs 83, a 5% stake or over 20.65 crore shares in SAIL could garner around Rs 1,714 crore to the exchequer, which is expecting a minimum amount of Rs 1,500 crore after taking into account retail discount. 

The government currently holds 80% stake in the company, which will fall to 75% after this offer.

The Centre plans to raise Rs 36,925 crore by selling its stake in 10 public sector undertakings, including behemoths Oil and Natural Gas Corpatiion (ONGC), Coal India and NHPC, and smaller firms like Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and Container Corporation of India (Concor).

Additionally, it plans to raise about Rs 6,500 crore from part-sale of the stake it holds through Specified Undertaking of Unit Trust of India (Suuti) in Axis Bank, Larsen & Toubro, and ITC; and Rs 15,000 crore from sale of its residual stake in Hindustan Zinc and Bharat Aluminium Company (Balco).

Apart from SAIL, finance ministry officials are confident that Coal India, ONGC, and NHPC will hit the market by the end of January. At current prices, the combined proceeds from these four public sector behemoths will be around Rs 42,911 crore.

So far, however, there is less clarity on stake sales in the smaller companies, some of which might be shelved. The combined proceeds from sale of five% each in Concor, PFC, REC and MOIL could be about Rs 5,210 crore at current rates, while the government expects about Rs 5,500 crore from sale of 10% each in Hindustan Aeronautics and Rashtriya Ispat Nigam.

Finance Minister Arun Jaitley has set a tight fiscal deficit target of 4.1% of gross domestic product, so every rupee counts.

The tax authorities have to raise Rs 6.54 lakh crore in the second half of 2014-15 — 28% more than what they did in the period from October 2013 to March 2014 — to meet the full-year target of Rs 9.77 lakh-crore. So, it is imperative that the targets from disinvestment, spectrum sales, and special dividends are met.