Up to 10% discount likely in all future divestment issues.
Discounts for retail investors may become a part of the government’s disinvestment policy, instead of being offered on a case-to-case basis. The discount offered could be up to 10 per cent of the issue price.
This follows the retail participation seen in the follow-on issue of NMDC earlier this month, where a five per cent discount was given to retail investors.
“NMDC got a better response from retail investors compared to earlier issues. The follow-on issue got about 190,000 applications from retail investors. A discount to employees is normally given but now the government is thinking of offering discounts for most upcoming issues as well to attract retail investors,” a senior official in the finance ministry, who did not want to be named, told Business Standard.
The government can offer a discount of up to 10 per cent by the guidelines of the Securities and Exchange Board of India. However, the discount for the majority of the public offers hitting the market next year could be around 5 per cent, the official said.
The government intends to mop up Rs 40,000 crore from public issues in 2010-11 against Rs 23,552 crore mobilised in the current year.
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NMDC was the first issue from the government where retail investors were given a 5 per cent discount on the issue price. NMDC’s issue price was fixed at Rs 300 per share while it was Rs 285 for employees and retail investors, which was a heavy discount to its market price of over Rs 400 a share.
The other issues during the year — of NHPC, NTPC, Oil India Ltd (OIL) and Rural Electrification Corporation (REC) — did not offer any discount to retail investors.
Employees, however, got 5 per cent discount on the floor price under French auction for NTPC and REC issues. OIL and NHPC did not give any discount to employees or retail investors. REC and NTPC got 40,000 and 60,000 applications, respectively, from retail investors.
NMDC was the biggest issue of the government in 2009-10, where Rs 9,930 crore was mobilised leaving it short by Rs 1,448 crore for its disinvestment target of Rs 25,000 crore this year.
The government mopped up Rs 8,480 crore from NTPC, Rs 2,247 crore from OIL, Rs 2,012 crore from NHPC and Rs 882 crore from REC.
| TRACK RECORD # NMDC was first issue from govt where retail investors were given a 5% discount on issue price # Discount of 5% on floor price was given to employees under French auction for NTPC and REC issues # No discounts were given to employees or retail investors for NHPC and OIL issues, though they did well # Discount to retail investors is expected to get better response for public issues # Government plans to raise Rs 40,000 crore through disinvestment in 2010-11 |
Companies which are slated for disinvestment next year include Hindustan Copper, Coal India, Bharat Sanchar Nigam Ltd (BSNL), Steel Authority of India Ltd (SAIL) and Engineers India Ltd (EIL).
Satluj Jal Vidyut Nigam Ltd, earlier scheduled for disinvestment in the current fiscal, will also hit the market in early 2010-11.
The department, however, is not sure about using the French auction route for public issues next year. It tried French auction for NTPC and REC. In case of REC it tweaked the policy and got a better response.