Marketing Psu Scrips

But the decision to offer a 10 per cent discount for small investor still needs a rethink. Since the disinvestment target will run into thousands of crores of rupees, the amount the government is likely to lose by offering a 10 per cent discount will be very high.

The government should, in fact, try to keep the cost of the whole exercise at minimum to bring about the desired effect. And there are many ways to achieve widespread dispersal of shares of the public sector undertakings without losing huge amounts by way of offering big discounts. The government could, for example, reserve a certain per cent of the targeted amount for the small investor by keeping a lower minimum application amount. This will ensure the participation of the small investor as well as a wider spread of scrips. The only problem likely to crop up is of multiple applications, but this is better than losing a few hundreds of crores of rupees.

 

Liquidity on the stock exchanges is also dependent on demand and supply. To create demand for PSU shares, the government should make them attractive by giving the management a free hand and speed up the process of decision-making.

However, though the Disinvestment Commission has suggested a long-term strategy of restructuring PSUs to ensure better price realisation, it is not clear whether the restructuring will be done before divestment or vice-versa. A classic chicken and egg story.

So far, disinvestment has taken precedence over restructuring. Companies like Nalco, Hindustan Petroleum Corporation (HPCL) still have to wait for months for approval of their new projects. VSNLs GDR issue is another example, though the managements approach has changed after the listing of shares. But that is still far from the minimum requirement.

The government has to provide complete autonomy to the board of those companies where it intends to retain control (51 per cent) before the actual divestment takes place. Here again, autonomy only related to investment and allied decisions is not sufficient.

Besides, linking autonomy with past performance will only be disastrous as in such a case, only strong PSUs will be getting the room to move. And of course, the strong performers will be none other than PSU monopolies.

A half-hearted approach, as regards functional autonomy, will only hurt the future prospects of the company when it comes to fund-raising. Also, there will be few takers for the stock when further disinvestment takes place. And defrauding the small investor is the last thing any government would want to be accused of.