Govt mulls bundling of RFP's, roadshows

To speed up stake sales for FY16

The finance ministry is considering bundling requests for proposals and roadshows in an effort to speed up disinvestments during 2015-16.

The disinvestment department usually issues separate requests for proposal to engage merchant bankers for each company in which the government is planning a stake sale. Similarly, investor roadshows are conducted separately for each company.

With a disinvestment target of Rs 69,500 crore for 2015-16, and with Cabinet approvals already in for stake sales worth Rs 50,000 crore in 20 state-owned companies, the government is weighing the option of bundling requests for proposals and roadshows.

If implemented, a request for proposals may be issued for four or five companies. Instead of working on one scrip, merchant bankers may find themselves handling a bunch of public sector undertakings' stake sales at the same time.

"It is an option we are exploring and has not been finalised yet. It has always been the case that merchant bankers aim to work on those companies where stake sales are likely to attract more buyers. If we bundle requests for proposals, even the less attractive names will be picked up," an official said.

"Also, there is a time factor here. Issuing 20 separate requests for proposals, and then going through the entire process for each one of them is time-consuming," he added.

The proposal will be put up to an inter-ministerial group for discussion. If accepted, the bundling will only be for requests for proposals and roadshows, and not for the actual stake sales. Notification to the exchanges, and stake sales, will happen separately for each PSU.

The disinvestment department is working on how to bundle the companies, by sector, market capitalisation, or any other parameter. "All the bundles may be similar in value, but beyond that the modalities are being worked upon," the official said.

Of the Rs 69,000 crore disinvestment target, Rs 41,000 is expected from minority stake sales and Rs 28,500 crore from strategic sales in loss-making PSUs or other assets like warehouses, factories, hotels and office buildings.

The disinvestment department has secured approvals for Rs 50,000 crore worth of stake sales ranging from 5-15 per cent in 20 PSUs. These include Power Finance Corp, NMDC, NTPC, Nalco, BHEL, MMTC, National Fertilizers, Rashtriya Chemicals and Fertilizers, Indian Oil, Hindustan Copper, State Trading Corp, India Tourism Development Corp, Engineers India, MOIL, SJVN, and Mangalore Refinery and Petrochemicals.

Not all these companies' stakes may be sold in 2015-16, but most will be. So far this year, only a five per cent stake in Rural Electrification Corp has been divested, garnering Rs 1,600 crore.

SPEEDY ACTION

• Disinvestment department may bundle a bunch of companies into a single RFP for merchant bankers
   
• Merchant bankers selected would have to work on stake sale and roadshows of multiple companies
   
• One RFP may be for four or more companies
   
• Proposal has not yet been finalised; to be taken up by an inter-ministerial panel
   
• Aim of the proposal is to save time in a year of ambitious disinvestment target
  

 

Aim is also to dissuade merchant bankers aiming for only the lucrative stake sales