The government has kickstarted the Rs 30,000-crore share-sale programme by initiating the process for divestment in three mining majors — NMDC, Nalco and Neyveli Lignite Corp (NLC). Based on the current market prices of these stocks, the issues are likely to bring in about Rs 10,000 crore to the government coffers.
The move comes ahead of a meeting of Finance Minister P Chidambaram with public sector companies next week to discuss the programme amid concerns over sluggish market conditions. The Department of Disinvestment (DoD) has put out request for proposals for appointing intermediaries like merchant bankers and legal advisors for divestment in these three companies.
These issues are proposed to be conducted via offer for sale (OFS) at stock exchanges, a mechanism introduced by Sebi last year.
The divestment of 10 per cent stake in NMDC is likely to be the largest of the three and could fetch about Rs 7,400 crore, going by the stock’s closing price of Rs 186 on Friday. The Nalco stake sale could fetch at least Rs 1,600 crore, while the NLC issue is expected to bring around Rs 700 crore.
| ON THE BLOCK Govt’s stake sale plan and expected revenues | |||
| Nalco | NLC | NMDC | |
| Shares (mn) | 313.00 | 83.88 | 396.47 |
| Stock price (Friday, Rs) | 51.70 | 79.30 | 186.65 |
| Amount (Rs cr) | 1618.20 | 665.20 | 7400.10 |
With the BSE Sensex gaining over 300 points on Friday, on favourable global developments, bankers are optimistic about pushing the sales through if priced well. Atul Mehra, co-CEO, JM Financial Consultants, a Mumbai-based investment bank, said: “It is a function of pricing. There is always demand for a quality company at the right price.”
Pricing had become a key issue, as the previous OFS transaction by the government did not find takers among institutional investors, both foreign and domestic. In March, the government had priced the ONGC offer at Rs 12,000 crore (Rs 290 a share, or five per cent premium over the prevailing market price). Bulk of this issue was picked by state-controlled Life Insurance Corporation, after which Sebi tweaked the rules for OFS.
The proposed issues would be the first set by the government under the new rules. In the case of NMDC, DoD has asked merchant bankers and selling brokers to give their proposals by September 28. The proposals for Nalco stake sale can be submitted by September 27. For NLC, legal advisors can send their proposals by September 12 and merchant bankers and selling brokers can do that by September 10.
In NMDC, the government plans to sell 396.47 million shares, or 10 per cent of its shareholding of 90 per cent. In Nalco, the plan is to dilute stake to 75 per cent (from the present 87.15 per cent), through sale of 313.13 million shares, while in NLC, five per cent paid-up equity share capital of the total shareholding of 93.56 per cent would be disinvested.