The government plans to sell 20 per cent of its stake in National Fertilizers (NFL) through an offer for sale (OFS), and has invited merchant bankers, brokers, and legal advisors to assist the transaction.
The government holds 74.71 per cent stake in the company, which is the second-largest producer of urea in the country. The sale could fetch the government around Rs 408 crore, according to the market closing price of the company’s shares on Wednesday.
The government intends to complete its divestment programmes for the ongoing fiscal (2020-21, or FY21) by mopping up Rs 32,000 crore. So far, the government has received Rs 19,499 crore through OFS, initial public offering, and other sales. The government has revised its divestment target downwards from Rs 2.1 trillion, as its ambitious privatisation programme has been deferred to next year.
For the next fiscal year (2021-22), the government expects to collect Rs 75,000 crore in disinvestment receipts, and Rs 1 trillion by divesting the government’s stake in public sector banks and financial institutions.
NFL’s half-yearly profit after tax for FY21 was Rs 198 crore. Its net worth was Rs 2,117 crore as on September 2020. The company has five gas-based ammonia-urea plants in Nangal and Bathinda (Punjab), Panipat (Haryana), and two plants at Vijaipur (Madhya Pradesh). The company currently has a total annual installed capacity of 3.57 million metric tonnes of urea, and has a share of about 15 per cent of total urea production in the country.
The last time the government had reduced its stake in NFL was in 2017-18, when it had sold 15 per cent in the company through OFS. The transaction had helped the exchequer garner Rs 531 crore from the sale. Back then, the floor price was set at Rs 72.80 a share, while the stock traded and closed at Rs 41.60 on Wednesday.
However, the company’s stock has recovered from its 52-week low of Rs 15 it had hit on March 23, 2020, when the spread of the Covid-19 pandemic had dragged the markets to their record lows.
Now, the government is also considering an allotment of shares to eligible and willing employees of NFL at a discount of the lowest cut-off price up to a maximum of certain percentage of the OFS size.
“The percentage and extent will be decided in due course. Merchant bankers and selling brokers will be required to render such assistance to the government, the Centre said in a note seeking advisors for the transaction.
This year, the government has completed OFS in four state-owned companies — Hindustan Aeronautics, Indian Railway Catering and Tourism Corporation, Bharat Dynamics, and Steel Authority of India, according to the recent data of the Department of Investment and Public Asset Management.