Under pressure to meet a respectable percentage of its Rs 40,000-crore disinvestment target for 2011-12, the government is set to finalise a plan early next month to hasten the selloff process in at least some public sector undertakings (PSUs).
It is pinning hope on secondary market sales of its part-equity. The current wait is for clarity on procedures from the Securities and Exchange Board of India (Sebi), since rules on auctioning of promoter shares are expected to be notified next week.
A senior disinvestment ministry official told Business Standard the two routes being looked at were auctioning of shares by PSUs and fast-track clearance for follow-on public offers (FPOs). The department of disinvestment recently held a meeting with merchant bankers to set the ball rolling.
The official added that Sebi was slated to notify guidelines for the auctioning route within a week. The disinvestment ministry, in consultation with the companies, would take a decision in this regard after the Sebi notification. After which, fresh clearance from the Cabinet would be required for PSUs whose FPOs were approved but could not be launched due to adverse market conditions, said the official.
| WAY TO MARKET |
| * Sebi allows auction and institutional placement |
| * Govt to use auction path |
| * Awaits regulator notification on auctioning of promoters’ shares |
| * Govt to also expedite clearance for follow-on offers |
A senior executive from Oil and Natural Gas Corporation(ONGC), in the list of companies cleared for an FPO this year, said, “A decision on timing and pricing would be taken after the notification but valuations may not be different from the normal FPO route. It depends on the market conditions.” But, the company was yet to hear from the disinvestment department in this regard.
The market regulator has allowed two additional methods, an Institutional Placement Programme, and an offer for sale of shares through the stock exchange.
Sebi announced in the first week of this month that it would allow owners of the top 100 companies by market value to raise funds by auctioning their stakes through stock exchanges. The government is likely to choose among ONGC, Steel Authority of India Ltd (SAIL) and Bharat Heavy Electricals (BHEL) for the auctioning route. According to Sebi, the offer has to be for at least one per cent of the company’s paid-up capital, which should be worth a minimum of Rs 25 crore.
Company owners can sell shares through stock exchange deals but they will not be allowed to bid for the shares themselves, it said in a statement on its website. The government is hoping to utilise this window for pushing disinvestment in the remaining period of 2011-12 (till March 31), as it has succeeded in raising only Rs 1,144 crore up till now, from equity sale in Power Finance Corporation, against the target of Rs 40,000 crore for the year. A merchant banker said the final contours outlined by Sebi would also an idea about retail participation.
The government garnered Rs 22,144 crore in 2010-11, when the market situation was comparatively better. The target last year was also kept at 40,000 crore, but more than expected collections from auctioning of third-generation telecom spectrum and broadband wireless access bandwidth gave it revenue comfort.
The government has already approved five cases for disinvestment this year, including that in BHEL. The approved pipeline includes disinvestment of five per cent paid –up equity capital of ONGC from the government shareholding.
The Cabinet Committee on Economic Affairs yesterday approved disinvestment of 10 per cent of its stake in Rashtriya Ispat Nigam Ltd through an initial public offering, a move that could fetch about Rs 2,500 crore.
Disinvestment of five per cent government stake in SAIL, in conjunction with issue of fresh equity of five per cent by the company, has also been cleared.
A poor stock market, that posted its first annual fall in three years in 2011, combined with risk aversion among investors, has prompted the government to delay share sale plans of several companies, including ONGC and SAIL.
