Global Bodies Seek Advisory Role In Divestment

International investment banks and consultancy firms are making a pitch to provide advisory services to the Disinvestment Commission, which is handling divestment of government stake in public sector undertakings (PSUs). But the commission has not yet decided if it wants to seek advisory services and, if so, in what manner it will use them.

Disinvestment Commission member-secretary P Shankar told Business Standard: It think this is pre-mature. We have to first come to grips with the job of disinvestment in 40 PSUs. We will take advice if and when we feel the need for expert assistance. We are not inviting anyone to make presentations. But we are listening to these companies whenever they approach us.

 

Banque Paribas, an investment bank, made a presentation yesterday. It is banking on its experience of advising different governments, including that of France, in privatisation, besides handling 19 share and debt issues of Indian companies, amounting to $1.8 billion, since January 1994.

Price Waterhouse, a consultancy firm, is projecting its capability in drawing up restructuring and disinvestment programmes for public sector undertakings after identifying a set of objectives.

It also wants to help in transfer of technology and strategic alliances, besides development of management skills and infrastructure. Even if the government decides to use advisory services, it will have to sort out whether it needs a set of advisors for different aspects of disinvestment or one for each sector.

Advisory services per se is not a very lucrative area for either investment banks or consultancy firms. But it often results in appointment as the global coordinator to PSU disinvestment. Besides, involvement in disinvestment gives a company an insight into the needs of the government and PSUs.

This is extremely useful in handling global or American depository receipts issues and in guiding investors looking for PSU shares.

The commission has organised two conferences on disinvestment. Price Waterhouse will make a presentation at a seminar being organised in New Delhi today. Some other companies, including Banque Paribas, will present their case at another seminar in Mumbai on February 5.

Investment banks and consultancy firms are vying with one another to prove the superiority of their services in privatisation.

Investment banks are strong in the area of floatation and sale of PSU shares, either through GDRs or ADRs, in the international market.

With their knowledge of global markets and share holder concerns, investment banks claim to be in a better position to handle the follow-up task of being the global coordinator to the privatisation of a PSU.

Banque Paribas vice-chairman Amaury-Daniel de Seze said: The day a public sector company acquires foreign share-holders, the attitude of its management changes. It raises issues and puts pressure on the management to perform. All these result in a great improvement in the performance of the company.

However Anthony Browne, global head of corporate finance in Price Waterhouse, said: A disinvestment programme should take into consideration the politically sensitive nature of the issue. A government may be looking for meeting a multiplicity of objectives while the market has its own set of considerations. This calls for a wide range of skills which are not held by an investment bank.