Cabinet Clears Vsnl, Ioc Stake Selloff

The cabinet, which took up the core group proposal, has opted for 7 per cent divestment in the case of VSNL (with government holding at 82 per cent) and 5 per cent in IOC (95 per cent government holding).

The core group to be headed by the cabinet secretary will decide on whether it would be a GDR/ADR offering and the merchant bankers to the issue.

The reserve price would be cleared by the cabinet at an "appropriate time". Sources indicate that the divestment is likely to take place in January, especially since the present capital market conditions are not conducive. Another reason is that a minimum time has to be allowed for merchant bankers to market the divestment offering. The merchant bankers have indicated that they would, on an average, require 90 days from the date of the mandate.

 

The core group proposal envisaged a simultaneous disinvestment of the government's equity in the domestic and international markets, delinked from a public offering by the company to fund its expansion plans. It had also decided not to go along with the merchant bankers mandated by the company -- this is applicable only to the VSNL issue where the company's mandate to manage the issue is currently held by Solomon Brothers, Kleinwort Benson and Jardine Fleming.

The government has targeted Rs 5,000 crore to be raised through disinvestment in the current financial year. In fiscal 1995-96, the government succeeded in raising only Rs 357 crore compared with the target of Rs 7,000 crore for the year.

It is estimated that a 7-per cent disinvestment (56 lakh shares) at an indicative price of Rs 1,100 per share should fetch the government Rs 616 crore.

Similarly, 5 per cent divestment of IOC shares at thecurrent market price of Rs 700 per share should bring in around Rs 350 crore.

Core group recast

The cabinet yesterday cleared the recast of the core group. The group will now be headed by the cabinet secretary and will include secretaries of the parent ministries of PSUs earmarked for divestment. Earlier, the group was headed by the finance secretary. This decision comes in the wake of the government's decision to involve the Disinvestment Commission in the first round of divestment. Earlier, the commission was only entrusted with this task in the third round of divestment./table>