Rolling list for divestment in the works

Finance ministry has identified around 15 companies that can be lined up for stake sale this year

The government is preparing a disinvestment road map where approvals will be taken for companies whose stakes can be sold in the next three to five years. The idea is to tap the market when the price is right and prevent hammering down of these stocks.

The finance ministry has identified around 15 companies, where the government's stakes can be divested this year. It has called a meeting of merchant bankers, administrative ministries and the public sector companies on the list on Monday and Tuesday to discuss the plan.

"We will identify the companies for disinvestment and keep everything ready, including Cabinet approvals and roadshows. It will provide a lot of flexibility and help time the issues better," said a finance ministry official who did not wish to be named.

At present, the government takes piecemeal Cabinet approvals for disinvestment. Often the stock price of the company cleared for disinvestment takes a beating as market players start selling it so that it is offered at a lower floor price in the offer for sale.

In the proposed system, it is expected the markets will receive such information barely two days in advance, providing less time for price manipulation. However, it may not always work because in the past the long gaps between approval and sale moderated valuations.   

 

In the meeting next week the government will identify companies that can come up for divestment in the next three months without controversy. Others will have to wait till the next financial year or whenever the market condition is right.

"When the supply of any stock in the market increases, there is a rundown on the stock price. Disinvestment increases the quantity of CPSE (central public sector enterprises) stock in the market. Therefore, the recent fall in share prices of Coal India, ONGC and NHPC is nothing unusual and does not show any diminished appetite for these stocks," Finance Minister Arun Jaitley had told the Rajya Sabha in a written reply earlier this week.

Officials, however, indicated the current financial year targets of Rs 36,925 crore from disinvestment in public sector companies and Rs 15,000 from the sale of residual stakes in former state-owned companies may not be met. The Sensex has gone southwards in the last few weeks.

"We won't do a distress sale. Never in the past this much has been mopped up from disinvestment," the official said. "Oil prices have provided a cushion to the government," he added, when asked whether falling short of the disinvestment target would widen the fiscal deficit.

The government has already received Cabinet approval for selling stakes in ONGC, Coal India, NHPC, PFC and REC. It divested five per cent in the Steel Authority of India (SAIL) earlier this month. The Rs 1,700 crore offer for sale was subscribed more than two times, while the portion reserved for retail investors - those investing up to Rs 2 lakh - was subscribed nearly three times.

Many of the companies in the new list are required to have a minimum 25 per cent public shareholding according to the Securities and Exchange Board of India (Sebi) norms. There are more than 30 companies where the government needs to bring its stake down to 75 per cent.