'Sebi decision on OFS not sufficient boost to PSU divestment'

Market regulator Sebi's decision to allow companies disclose Offer for Sale plans two 'banking' days ahead of the issue may not help much in PSU disinvestment, a government official said.
Sebi last week allowed companies to disclose OFS plans two banking days prior to the share sale -- a move that may lead to most such share sales taking place on Mondays as the Department of Disinvestment does not want trading days in-between the announcement and stake sale.
"It is difficult to divest PSU stocks on Mondays as historical data show trading is the most volatile on that day," the finance ministry official said but did not elaborate further on this.

Earlier, the companies were required to give an advance notice of two trading days before the OFS, which the government had been saying gave scope for speculators to beat down the share price of the disinvestment-bound PSU.
"Announcement of the second and fourth Saturdays of a month as banking holidays is in the offing. So, basically that would further limit the number of days that is available for announcement of OFS on Friday," the official said.
The Disinvestment Department held meeting with the market regulator last week and expressed its views.

"We still maintain the view that an investor who plans to invest in the OFS can do it on notice of one day," the official added.

Sebi has said at least two days of notice is necessary to allow retail investors to arrange for funds and help them participate in the OFS.
As the companies are required to give a notice by 5 pm, the disclosure is mostly made after market closing at 3.30 pm and just one day of advance notice would not leave even a single banking day with the investor.
The two trading day notice gives time to speculators to hammer down the stock price and as normal trading in shares is permitted on the disinvestment day, it often hampers the best price realisation of the government stake, the official said.

Shares of Coal India were hammered by about Rs 20 from the time the share sale was officially announced, while for REC, the scrip was hammered by about Rs 15, the official said.
This led to a loss to the exchequer of Rs 1,200 crore and Rs 70 crore due to loss in value of Coal India and REC respectively.
The Finance Ministry has set a target to raise Rs 69,500 crore through PSU disinvestment. Of this, Rs 41,000 crore is to come from minority stake sale in PSUs and Rs 28,500 crore from strategic stake sale.
Talking about disinvestment target for current fiscal, the official said: "Greece credit woes are likely to keep share market volatile. But we hope to get the highest ever proceeds".

Although the Department of Disinvestment received approval from the Cabinet for selling minority stakes worth about Rs 50,000 crore in a host of PSUs, it has been able to divest stake in one company, REC, so far this fiscal due to bad market conditions.