PSU staff may form trusts to buy stake

The employee options in primary market divestments have fallen woefully short of the 5 per cent quota

Employees of state-owned companies may set up trusts to pool resources and pick up stakes in these firms on the exchanges.

This follows an informal missive from the government to public sector undertakings to form employee trusts and participate in the divestment drive.

Officials have told Business Standard that the employee options in primary market divestments, like initial public offerings, and secondary market stake sales, like offers for sale, have fallen woefully short of the five per cent quota. To ensure greater participation by PSU employees, a number of steps have been taken.

Last month, the Securities and Exchange Board of India (Sebi) raised the limit for employees buying shares to Rs 5 lakh per individual from Rs 2 lakh. Sources said the limit was only for primary market operations. “Sebi later clarified to the government that for secondary market divestments, there was no limit. So if a senior PSU executive wants to buy more than Rs 5 lakh worth of shares in an offer for sale, he or she can do so,” said a senior official.

Sources also added that PSUs had been told that they should get their workforce to pool resources under employee trusts to participate in employee offerings and ensure the full five per cent quota for them in any stake sale was met.

In the Indian Oil offer for sale in May, only 53 per cent of the five per cent quota was bought by employees. The Centre garnered nearly Rs 240 crore. In the NTPC offer for sale, about 85 per cent of the shares offered to employees were lapped up. The proceeds from that were Rs 200 crore.

“Had we been able to sell all the shares under the employee quota, that would have got us additional proceeds. If employees pool resources under a trust, then we may be able to use up the five per cent quota,” another official said.

The person added that forming such trusts would constitute a healthy management practice. “If a trust buys more than a 10 per cent stake in a PSU, then employees will be able to represent themselves on the board of directors. They will be empowered,” the official said.

The disinvestment target, including strategic sale, for 2016-17 is Rs 56,500 crore. Of this, Rs 36,000 crore is expected to come from minority stake sales and buybacks, while Rs 20,500 crore is expected to comfrom strategic sales in PSUs or their assets such as factories, warehouses and office buildings.
MAKING EMPLOYEES OWNERS

• Govt informally tells PSUs to let employees form trusts
   
• Such employee trusts to buy stake in their employers during stake sale
   
• Aim is to meet the 5% quota set aside in market offerings for employees
   
• No upper limit per employee to buy shares in an offer for sale