Govt plans to change criteria of advisors for PSU stake sale

The government is planning to change the criteria of appointing investment bankers for issues of public sector companies so that only those with deep pockets do not get appointed.

The Disinvestment Department will soon approach the central vigilance commissioner (CVC) to allow it to change the criteria of choosing investment bankers from just cost-basis to quality-cum-cost basis, an official said.

The new criterion, which will give more weightage to quality of investment bankers, will however not apply to four PSUs — NTPC, REC, NMDC, SJVNL — that would be disinvested this fiscal.

At present, investment bankers are selected on the cost basis — the one qualifying the technical bid and quoting the lowest cost is selected as advisors, the official said.

The new criteria, if accepted, will assign weights to the track record of the investment bankers, including their experience, and match them with their costs, the official added.

The official said cost quoted by bidder is likely to be given 30 per cent weight and quality of investment bankers 70 per cent in the new criteria.

The move to review the selection process was required as some bankers recently offerred to charge zero transaction fee or a fee as low as 0.001 per cent for the job. Investment banks usually charge 1-3 per cent of the amount raised by a company in a public offering.