MMTC share-sale fetches Rs 568 cr

Government kicks off FY14 disinvestment drive; MMTC becomes public shareholding compliant

The government has kicked off its 2013-14 divestment programme by successfully offloading 9.33 per cent stake in trading firm MMTC Ltd. The offer for sale (OFS) for 93.3 million shares of MMTC today saw 1.5 times subscription, with average bids coming in at Rs 60.86 apiece, helping the government fetch Rs 568 crore.

The floor price for the OFS was fixed at Rs 60 a share, a discount of 70 per cent to the scrip’s previous day's closing price. The stock today closed at Rs 190.35 on the BSE, down 9.98 per cent, when the benchmark Sensex shed 1.12 per cent to 18,827.16.

Bankers handling the MMTC stake sale said the issue saw good response due to attractive pricing. “The market price was not the true indicator due to low float. The pricing was recommended based on the fundamental valuations of the company and the value of its investments,” said P K Sethi, head of investment banking, IDBI Capital.

A Department of Disinvestment official, said the share sale was priced at a deep discount as the scrip was illiquid. IDFC Capital and IDBI Capital handled the MMTC stake sale. The public holding in MMTC was less than 0.7 per cent. Post today's stake sale, MMTC is now compliant with the market regulator’s shareholding norms as the government holding has come down to 90 per cent.

According to the Securities and Exchange Board of India’s (Sebi) minimum public shareholding norms, all public sector undertakings (PSUs) have to bring down government holding to at least 90 per cent before August 9. Currently, there are about a dozen public sector entities that have government holding in excess of 90 per cent.

The MMTC share sale was, earlier, part of last year's divestment programme. However, differences between the government and investment bankers had caused the delay.

Shares of other PSUs, in which the government has to offload its holdings to meet the shareholding norm, fell today on concern their sales, too, could be priced at a deep discounts to the current market price.

Under the 2012-13 disinvestment programme, the government had raised Rs 24,000 crore by selling shares in seven companies, which had helped it contain the fiscal deficit at 5.2 per cent. The last financial year was the best-ever for disinvestment. The total amount raised surpassed the previous record of Rs 23,553 crore raised in 2009-10.  The divestment target for 2013-14 has been set at Rs 40,000 crore. The Centre aims to raise half of this amount by selling a 10 per cent stake in Coal India, the world’s largest coal miner. The PSUs next in line for divestment include National Fertilizers, Oil India, State Trading Corp of India and NHPC.