Stake Selloff Proposed In 3 More Psus

The Disinvestment Commis-sion yesterday recommended a further divestment of 14.75 per cent of government equity in the Mahanagar Telephone Nigam Ltd (MTNL), along with a 26 per cent divestment in the Container Corp of India Ltd (Concor). This would reduce the governments stake in both companies to 51 per cent.

However, the commission recommended that divestment in oil public sector giants Oil India Ltd (OIL) and Oil and Natural Gas Corporation Ltd (ONGC) should be put on hold till the administered price mechanism is dismantled.

The commission has identified Kudremukh Iron Ore Company Ltd (KIOCL) as a non-core public sector undertaking and asked the government to seek a strategic partner for it. The partner should initially be given a 30 per cent holding, subject to the understanding that this would be stepped up to 40 per cent within the next two years. This should be followed by a public issue, leaving the government with a stake of 26 per cent at the end of the phased disinvestment process, suggested the commission.

 

Submitting its third report, the commission also recommended that the government should defer divestment in Rail India Technical and Economic Services Limited (RITES) till the companys scrip becomes attractive to small and institutional investors. The commission emphatically stated that divestment in RITES should not be considered till the companys competitive strengths are improved and its dues from Iraq are settled. The commission has identified several major areas of concern in RITES which need to be addressed before divestment is considered.

These include the need to strengthen the companys marketing skills since it is presently dependent on a few large clients.

The companys international experience is confined to railway projects and its present competitive edge would be dulled once foreign consultants enter the fray, noted the commission.

The commission has suggested that out of the 14.75 per cent divestment recommended for MTNL, 10 per cent or 60 million shares should be placed with foreign investors through a GDR issue. This should be followed by a domestic offering of 4.75 per cent of the government stake or 28. 3 million shares to institutional and retail investors.

The timing of the issue has been left to the core group of secretaries. The commission has also recommended that MTNLs board of directors should be granted full autonomy to conduct the companys operations.

In Concors case, the commission has recommended that the governments holding should be restricted to 100 lakh shares, while 125 lakh shares should be publicly issued. The government had earlier divested 23 per cent of its stake in the company in 1992 and 1994.

These shares are mostly held by foreign financial institutions.

The commission has argued that Concors World Bank loan of Rs 380 crore will become payable in 2002, which could affect the companys ability to raise further debt for its projected capital outlay.

Therefore, a public issue to raise Rs 250-300 crore should be considered.

The commission has recommended that both Mahanagar Telephone Nigam Ltd(MTNL) and Concor should join the National Stock Depositories Ltd (NSDL) before considering any issue.

Apart from the benefits of dematerialisation, this would also benefit small investors by enabling them to buy shares in much smaller quantities than the normal tradable lots which can also be traded on the National Stock Exchange (NSE) without attracting discounts that go with odd lots.

Stating that the book-building method should be adopted for both the MTNL and Concor issues, the commission also recommended that small individual investors should be given a retail offer at a discount of 10 per cent to the institutional price.

Disinvestment Commission chairman G V Ramakrishna said that unless the government implemented the panels recommendations at the earliest, it would be difficult to achieve the divestment receipts target of Rs 4,800 crore for 1997-98.

Ramakrishna said the commission had made recommendations for 15 of the total 50 public sector undertakings which were referred to it.

The remaining 35 public sector undertakings were under examination, he added.

The commissions two earlier reports had recommended divestment in nine PSUs, including ITDC, MFIL, HTL, ITI, Balco, BRPL, Gail, Moil and MFL.